Mortgage: Pros and Cons of Paying It Down Early.

Home ownership is a huge milestone in financial terms and many people would want the end result to be a home that has no mortgage and they lead a life without debt. Nonetheless, it is not always that easy as it appears to be. Although it has some obvious advantages, there are also some factors to be taken into consideration before you decide to jump. We know that the process of paying off your mortgage early is a journey, and we will be happy to assist you with the benefits and limitations of paying off the mortgage at Seabrooke Group.

What is the Implication of Paying off your Mortgage?

It is worthwhile first to define what is meant by paying off mortgage early before delving into the merits and demerits of the same. Mortgage prepayment would mean a faster repayment of your home loan than the schedule which was agreed upon. This one can be accomplished by paying additional mortgage payments, lump sums or even by refinancing to a shorter loan term. The aim is to achieve a lower loan balance prior to the expiry of the initial term, and this would imply that you will be a full owner of your home within a shorter period.

The Advantages of Paying Your Mortgage off.

1. Economic Reliance and Economic Liberty.

Emotional relief is one of the major reasons why homeowners pay off their mortgage earlier than planned. Financial freedom is the sense that you will not get stressed to pay a mortgage monthly and have the freedom to save or invest in other financial objectives. Early payment of mortgage may also see you having more disposable income hence can afford to educate your children, travel or retire earlier.

At Seabrooke Group, we experience the process of how it is possible to become debt-free in order to enhance general financial health. Your mortgage payment is gone and now, you are able to have the entire ownership of a house minus the burden.

2. Saving Money on Interest

One of the greatest advantages of the mortgage pay off is that you save on interest. Mortgages are generally front loaded in terms of interest, and this implies that during the initial years, a huge percentage of your monthly installments are used to pay off interest and not the principal. Early payments can help you tremendously save on the rate of interest charged on the loan throughout the period of the loan.

Taking the example, in case you have a 30 year mortgage and you pay extra payments or lump sum payments on your own mortgage, you may reduce years of your loan and save thousands of dollars in interest. This is more so useful to those who have been paying their mortgages over a few years and now wish to pay it in a shorter period.

3. Increased Home Equity

By paying early on your mortgage you are accumulating more equity in your home at a greater rate. The difference between how much your home is worth in the market and the loan amount owed is the home equity. The more equity you possess the more you have ownership of your property which can prove beneficial in case you want to sell it, refinance or take out a home equity loan.

Being a free owner also gives one a sense of security as one knows that their financial future is not as dependent on debt. In the case of Seabrooke Group, we make our clients realize the financial gains of home equity creation in the long-term.

4. No Risk of Foreclosure

At worst, this will mean that in case you fail to pay your mortgages, your lender can take away your house. Nonetheless, when you own your house with no mortgage balance left behind, you are not at risk of foreclosure. Early mortgage pay off gives one the comfort that he or she has full control of the home.

The Disadvantages of Paying off your mortgage early.

1. Opportunity Cost

Although it might be a good idea to pay your mortgage before the interest, you should have an opportunity cost in view. You can invest the money in other areas that pay higher returns instead of spending an additional money to pay off your mortgage. As an illustration; when you invest in the stock market or you make contributions to your retirement funds, you might experience higher growth in the long-term than it would have been had you paid off your mortgage on time.

In the case of Seabrooke Group, we have been keen to ensure that debt repayment is balanced with other investment opportunities. In case you are thinking of paying the mortgages ahead of schedule it is important to make sure that you are not giving up more profitable investment opportunities that have a potential of increasing your fortunes in the long term.

2. Reduced goal-oriented Slower Savings.

Although it may be a great idea to pay up your mortgage early, this will impair with your capacity to save towards other significant financial objectives. Indicatively, when you are more focused on the mortgage repayment, you can postpone saving towards retirement or emergency fund. These are long term financial objectives that ought to be calculated before paying an additional amount towards the mortgage.

One must make sure that you are not emptying your savings so that you can pay in a short time. Otherwise, balance between paying off your mortgage and investing in other areas of your finances should be sought.

3. Losing Tax Benefits

There are instances when you would lose on tax benefits when you pay off your mortgage early. In the case of itemized taxpayer, the taxpayer can deduct mortgage interest, thus lowering the amount of taxable income. This tax incentive can be lost by paying off your mortgage early, especially when you are in a higher tax bracket.

Remember to consider advantage of saving in taxes against the urge to live a debt free life. It is advisable to seek the consultation of a tax expert who can advise you on the consequences of paying off your mortgage early on the remainder of your taxes.

rnatives you can consider:

1. Mortgage Refinancing: It is possible to pay off your loan sooner without compromising on other financial targets by refinancing your mortgage into a shorter term or lower interest rate.

2. Investment: Think about adding additional investing to the retirement funds or investment portfolio. Compound interest means that such investments have a possibility of giving higher returns than the interest saved through an early payoff of mortgage.

3. Hybrid Solution: Strike a balance between being a mortgage-quitter and saving towards other priority investments.

4. Dipping into Your Emergency Fund

The cost of paying off your mortgage ahead of the scheduled date would be very high and in case you are utilizing savings and or emergency fund to do so, you may end up leaving yourself in a financial crisis. One should also have a reserve of cash in case of some unforeseen costs like medical costs, car repair, or repairing the house. Seabrooke Group will always advise to keep a viable emergency fund because this gives the security in the event of job loss or other emergencies.

The things to keep in mind before you pay your mortgage early.

There are a few factors to consider before you make a decision to pay off your mortgage early:

• Interest Rates: When your mortgage is at a low interest rate, then perhaps it would be more prudent to invest any extra money to other opportunities that will yield higher.

Instead you can ask the following questions: - - Financial Goals: Evaluate your short-term and long-term goals. Do you value saving towards retirement or clearing debt? Develop a plan that will strike a balance between these priorities.

Other Debts: When you have a high interest debt such as credit cards or personal loans, then it can be more advantageous to clear them up.

Other options to Paying off your mortgage early.

In case you cannot decide that it is better to pay off your mortgage sooner, there is another option that you can go with:

1. Mortgage Refinancing: Refining your mortgage by shortening its term or reducing the interest rate can enable you to fare off your mortgage loan faster without sacrificing other financial objectives.

2. Investing: Investing some additional money in retirement accounts or investments. When using a compound interest, such investments may even yield greater returns than the interest saved by the early repayment of the mortgage.

3. Hybrid Solution: Strike a balance between the mortgage payoff and saving money to other valuable financial goals.

Conclusion

In the case of Seabrooke Group, we realize that it is a personal choice whether to offset your mortgage or not, which can only be determined by your own financial conditions. We urge the homeowners to think twice before opting to prematurely repay their mortgage. You are able to use interest savings, investment opportunity, and financial goals to make a wise decision that will not jeopardize your long-term plans.

When you are not confident about what is the most appropriate move to take or you need the right advice on how to balance your mortgage and other priorities in your life, contact us at Seabrooke Group. We have come to make these key decisions and get your financial future on the right path.

Do you consider paying your mortgage early? Or maybe you want to know how to pay mortgage payments and other financial obligations? Call Seabrooke Group now to receive expert advice and guidance on how to make the most effective financial decision and achieve your future.