Three Reasons Why You Should Consider an Early Mortgage Payoff

A home mortgage is usually the biggest expense that a family faces each month. Many people think of a mortgage as an acceptable debt, taking 30 years to payoff their mortgage while thinking that they are actually making money off of their mortgage since the mortgage interest is a tax deduction, which is often not the case. We rarely talk about the benefits of an early mortgage payoff, so here are three reasons why you should consider an early mortgage payoff:

1. You'll save money when you do an early mortgage payoff: Of course, the biggest reason why you should consider an early mortgage payoff is that you'll save a significant amount of money. By putting an extra $100 a month towards your 30-year mortgage, you can save up to $40,000 in interest costs (assuming an interest rate of 6%). The more money that you put towards your mortgage, the more money you can save - it's that simple. If you want to consider your own situation, take a look at the many online mortgage payoff calculators to see how much you can save by completing an early mortgage payoff.

2. Using your mortgage as a tax deduction is not a big savings for most people: When considering the tax benefits of your mortgage, you have to consider what your actual tax rate is, as those in a higher tax bracket will see more advantages to having a mortgage than those in lower tax brackets. For example, if you have a $100,000 30-year mortgage with a 6% interest rate, you will see an overall tax reduction of $38,225 over the life of the mortgage if you are in a 33% tax bracket (which most of us aren't lucky enough to be in). However, if you are in the more likely 15% tax bracket, you will see a $17,374 tax reduction over the 30 year life of the mortgage. In this case, it definitely makes sense to do an early mortgage payoff. Paying an extra $100 per month as in the above example will net you an extra $20,000 over thirty years, even after taking the tax advantages into account.

3. An early mortgage payoff will give you peace of mind: Actually owning the home that you live in can give you and your family great comfort, knowing that if something were to happen to you, you wouldn't have to worry about whether or not your family would be able to afford to continue to live in your home. This kind of security can be priceless and should definitely be considered when determining whether to complete an early mortgage payoff.