Do you think making extra payments towards your mortgage loan and paying down your home loan fast will help you boost your financial future? Though this statement is correct, yet you might need to rethink and analyze your financial position before you pay extra dollars towards paying off your mortgage loan early. One of the reasons might be that you might have to make a pre-payment penalty if you try paying off your mortgage loan very early. Here are 4 other reasons to not use extra dollars towards paying off your mortgage loan early.
- You have other types of debts to pay off - Usually the interest rates on credit cards are much higher than that of mortgage loans. Therefore, if you have too many credit cards to repay, then using those extra payments towards paying off or reducing your credit card debts, is a much wiser option. Doing so, you can save significant dollars which otherwise you would have to use towards making interest payments. Paying back your credit cards will also help you boost your credit score, to some extent.
- You do not have enough in your emergency fund - You should always have enough in your emergency fund for the rainy days. Therefore, it will not be wise to pay extra towards paying off your mortgage loan, if you feel you don't have enough in your emergency fund. You never know when you might feel the need to use your emergency fund. Therefore, saving in your emergency fund should be your priority, if you can continue making the required monthly mortgage payments towards your home mortgage, with ease.
- Monthly mortgage payments become low comparatively - If you have taken out a fixed rate mortgage, then you might feel that the monthly mortgage payments are decreasing with time. What is meant by this is, the cost of items usually increases with time, but in the case of a fixed rate mortgage, the home loan payments remain same throughout the loan term. Moreover, if you have taken out a fixed rate mortgage at a relatively lower interest, then your monthly home loan payments should be affordable. So, after a few years, if your income tends to increase with inflation, then you will feel that you don't have to try much in making your monthly home loan payments.
- You can use extra dollars somewhere else - Before you make extra payments towards your mortgage loan, make sure you're not compromising elsewhere. For example, you can use the extra money to boost your career; you can pursue a certificate course, which in turn, will help you earn more in the future. It might also happen that investing the extra amount will help you yield better returns in the future.
Though there are reasons to delay paying off your home loan early, you should never miss out making the monthly mortgage payments. Doing so, your house might get foreclosed and you might lose the property. So, always plan a budget and allocate appropriate amounts to each item, in order to meet your daily necessities and save a definite amount in order to have a better financial future.