Benefits of Paying Off Your Mortgage

When homebuyers sign on the dotted line at closing, many have a hard time picturing the day they will own their home outright. With 90% of American homeowners electing for a 30-year loan, it can be difficult to see the light at the end of the tunnel, but paying off your mortgage before it comes due is an attainable and often overlooked goal. Ruoff is here to remind you that not only is this possible, it may be just the goal you didn’t know you needed, as the benefits of paying off your mortgage early are well worth the work.

Save Some Money

The amount of money homeowners can save when they pay off their mortgage even a little early is not to be ignored. Borrowers who succeed in repaying their loan ahead of time typically save thousands, even tens of thousands of dollars in interest. Not only will you be pocketing that monthly mortgage amount, but you will also have avoided spending that money on unnecessary interest.

Shave Years Off of Your Loan

Obviously, borrowers save money when they pay their mortgage off early, but they also save themselves years off the end of their loan. Imagine the financial freedom that comes without having to worry about a house payment each month. That freedom could very well be yours.

Increase Your Borrowing Capacity

Full and successful repayment of any loan leaves room for additional borrowing, but the size of a mortgage usually factors in to an individual’s debt-to-income ratio quite substantially. Paying this size loan off makes space for any additional purchases that require a lender’s approval.

Make Room for Improvements

Another big benefit of paying off your mortgage is the ability to make some of those needed home improvements without having to borrow or bargain your way to the upgrades. Expand your living space with a fun outdoor area, make that beautiful gourmet kitchen finally come to life, build some walk-in closets, or take a peek at these clever ideas to update your house without emptying your wallet.

Buy a Second Home or Investment Property

When you have become accustomed to setting aside a certain amount for a monthly house payment, the transition from spending that money on your mortgage to spending that money on a vacation home or investment property is a pretty easy one to make. Take a couple years to set your previous mortgage amount aside until you have built a solid down payment, then take the plunge. With the continued rise of vacation rentals, people across the country are finding affordable ways to purchase vacation properties for themselves that can pay dividends when also rented out.

Steps to an Early Pay-Off

Only 28% of American homeowners under retirement age have paid off their mortgages, so it may seem impossible for anyone under the age of 60 to even consider getting themselves to that final house payment even a day ahead of schedule … but oh, the freedom that comes to those who do. Here are a few first steps homeowners can take to help them toward early pay-off:

1. Make Extra Payments – Even scheduling just one additional payment each year can reduce the life of the standard loan by 4-6 years. Imagine what you could accomplish with two!

2. Shop Around for Insurance – Homeowner’s insurance is a must to protect your investment, but the cost of insurance can vary greatly by policy and provider. Shop around every couple of years to ensure you are getting the best price. Then, use the savings you uncover for an additional principal payment.

3. Apply those Lump Sums – While not everyone receives a tax refund or bonus check each year, if you are one of the many who do, put at least some of this lump sum toward your outstanding mortgage debt.

4. Stay Disciplined – It can be very easy to get swept away with needless spending, but homeowners who stay disciplined and stick to a budget are often rewarded with less overall debt and far earlier pay-offs.

With the real estate market at an all-time high, homebuyers might find it difficult to foresee a day when they could be mortgage-free, but what a beautiful vision that is and one that may be closer than you think. For homeowners willing to cut costs, stick to a sound budget, and practice self-discipline, it is a reachable goal with worthwhile benefits. Picture yourself ten or fifteen years down the road, house paid off, cash in your pocket. Free from the weight and responsibility of your mortgage, what might that picture look like? What might you have the freedom (and money) to do instead?