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Should I Pay Off My Mortgage Early?

So you’ve bought a house? Congratulations!

With a purchase as big as a home, you may be feeling mixed emotions. Chances are, you’re now very aware of your spending and the bills you have, with lots of questions running through your mind about your new home.

One of the most commonly asked questions we receive is, Should I pay off my mortgage early? There are a few factors to consider when making this decision. Thankfully, we are here to help answer all your mortgage-related questions.

What is a mortgage payment?

First, understand what making a mortgage payment means. Typically, a mortgage payment is split between the principal and the interest of the loan. Interest accrues the entire time you have the loan, so you can end up paying thousands more than what the loan is for.

By paying off your mortgage early, you are accruing less interest on the principal.

Early Mortgage Payments

So when should you focus on making early payments on your mortgage?

Since contributing more money than expected to your mortgage payments will increase the amount you spend in a month, the first step is to make sure you can afford it.

The second step is to consider your other savings accounts and debts. Do you have an emergency fund already saved up? Do you have other loans with much larger interest rates? The decision to pay off your mortgage early depends heavily on the answers to these questions.

Having an emergency fund that is equal to about 3-6 months of your household expenses is important in case of unforeseen circumstances such as unemployment, hospitalization, or natural disaster.

Other loans that might have higher interest, such as credit card debt or student loans, may require more attention sooner than your mortgage. Forgetting these loans and only focusing on your mortgage could end up costing more money in the long run, thanks to high interest rates.

If you’ve paid off other loans and have a sizable emergency fund, though, paying off your mortgage early might be right for you!

Chip Away at Your Mortgage

Consider switching your payments to be bi-monthly or make one extra payment per year. This can drastically change the number of years it will take to pay off that loan, thus reducing the costs accrued from interest.

Curious just how much you could save? Use Landmark National Bank’s helpful Quick Rate Calculator tool to determine your options.

Still have questions? Contact us at Landmark to answer all your questions regarding home loans, interest rates, and mortgage payments. Our helpful online tools can help you determine what loans you need and how to get them.

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