THE UPSIDE OF EARLY MORTGAGE REPAYMENT

Your dream of buying a home has come to fruition and you enjoy every single moment living in your humble abode. Come first mortgage payment, you look forward to settling all your dues as soon as you can. You take that option into consideration despite life’s uncertainties. Not to mention the skepticism about the global economy, aggravated by Chinese economic woes, erratic market movements, and everything in between.

Having said that, does it pay to repay a loan the soonest time possible?

There are certain benefits to immediate mortgage repayment. The first and (perhaps the) most compelling reason is this will save you thousands of dollars, reducing the interest rate to be paid in the future. That’s a huge relief on your budget.

Another reason is peace of mind coming from repaying the loan ahead of time and the reality of owning a house. Monthly payment is lower than before. Hence, the prospect of losing a job or being underemployed is no longer looming.

Arguably, the best reason for paying off a mortgage early, according to financial advisors and seasoned investors, is tax advantage. A favorite among homeowners, such a deduction can be availed if this is indicated in the tax return and you belong to the highest income bracket. An individual gets a 35-cent federal tax bracket for each $1 mortgage interest payment.

Many people, however, stipulate repaying a loan is not advisable. For them, it is better to make the money work for you than to make more payments in order to gain greater returns in the long stretch. But that recommendation can make or break your finances, based on several factors such as finances, investment decisions, or prevailing market movements.

Are you still considering early repayment? Read on.

• Mortgage repayment begins with sending money. Depending on the creditor, they have differing payment schedule.
• Be keen on interest rates. You may opt to secure refinancing. This is most useful if you intend to lower the rate, shorten the payment duration, or both.
• Also, if your receive bonuses or your salary increases through the years, allocate those to repayment. Remember it makes sense to pay early.