The The Right Time to Pay Off Your Mortgage

If you are trying to relieve your debt obligation or you have savings or inheritance in which to pay off debt a consideration may be whether you should pay off your mortgage. The answer to that will be as different as each situation is. For one homeowner the answer may be no, while another may be yes or maybe.

The basic answer is to consider which debt is costing you more every month or what debt is costing you the most as it lingers. Some debts are borrowed at very low interest rates, such as a student loan and those types of debts are rarely the ones that should be paid off first. Whereas credit cards are usually carrying high interest rates and these should be the main debts at the top of your list to reduce.

Then there is the question as to whether you should pay off or pay down a mortgage. If you are seeking a remortgage then lowering the debt on the current mortgage could very well get you a much better deal on the remortgage and in that case then that is where you should concentrate your funds. The lower the current debt on the property then the better remortgage deal that will be found.

It should be considered whether the remortgage savings benefit will be more beneficial in the long run than paying off a different debt. Considering that a mortgage debt is usually much larger then that would be the case. Yet some mortgage interest rates can come in lower than interest on a bulk of credit card debt in which case the credit card debt should be considered first.

Also, if a fixed rate remortgage is going to lower the risk of higher debt if there is an interest rate increase then again, paying down the debt of the mortgage to get a better remortgage deal will be beneficial. There are also cases where there is a difficulty in obtaining a remortgage and lowering the debt can increase the chances of approval. If the remortgage is vital to financial health then a pay down with savings or other funds would be a good idea.

Another consideration on whether you should or should not pay down or pay off a mortgage would be whether you should instead save the money. The answer to that would be whether the interest payback on the investment would pay more than what the cost of the interest on the mortgage is currently. In other words, you would need to figure out what you would make on the savings versus what it costs you to maintain the mortgage debt. Which ever leaves or puts more money into your budget should be the choice.

There will also be the consideration of any fees for early pay off or pay down of your mortgage. Some lenders penalize any pay off or pay down of mortgage balances and those fees and penalties should definitely be considered. To find out if you would have any fees for early payment it would be good to contact your lender.

A homeowner should also consider the fact that if the total savings or total of available funds were used to pay off a mortgage or pay it down that there would not be a way to gain access to the money. If an emergency fund would be helpful then some or all of the money might be better placed into savings rather than toward a mortgage. For if a loan were necessary in the case of a financial emergency, the rate of the loan would most likely be more expensive than the mortgage interest itself thus increasing your cost.

The decision as to whether to pay down or pay off a mortgage debt will depend on each situation. The consideration of whether to do so will involve many factors. Once the different options listed above are reviewed then the homeowner may still want to obtain advice from a financial advisor. The answer isn’t easy to come by but rather should be found by taking all aspects into account.