Deciding When to Pay Off Your Mortgage

It is understandable that you may be interested in paying off your mortgage ahead of time. However, there are certain issues to consider before you resolve to take that step.

Chicago, IL (prHWY.com) February 1, 2012 - It is understandable that you may be interested in paying off your mortgage ahead of time. However, there are certain issues to consider before you resolve to take that step. They include the following:

�--� Finding credit card debt forgiveness and making contributions to a retirement plan should be top priorities for virtually everyone, as opposed to paying of their mortgage early. If you are close to retiring and are interested in eliminating your mortgage, in that case, it is essential to ensure that you will have sufficient funds in order to retire comfortably. Be certain that you have an emergency fund covering six months of living expenses, and that you can afford to add more to your budget for paying off your mortgage. If you don't, leave your current mortgage payment plan in place until those other issues have been resolved.

�--� If you plan on selling your home soon and want to downsize, it might be a better idea to set aside some cash for a down payment on your new home. Note that, because of uncertain conditions in the housing market in most places, lenders are requiring higher down payments than they did in the past.

�--� Do an analysis of the mortgage interest deduction on federal income taxes, which can be a significant amount when you itemize deductions on your tax return. If you end up paying less interest, remember that your itemized deduction will also be lower, and the difference may surprise you.

�--� Use a mortgage tax-deduction calculator to determine the rate of return for paying off your mortgage, and compare that to the potential income from your investments. Most consumers do better when they invest their money, rather than paying off their loan. Also, if you are in a position pay your mortgage off early, you can then invest what you were paying every month in a retirement or savings account instead.

If you decide that an accelerated payment schedule will work for you, there are several steps you can take:
�--� After paying off your excess debt, add any additional income to your usual mortgage payment, which can be done easily if it includes a space for "additional principal." Otherwise, you can use your lender's preferred method, and verify that no prepayment penalty is required.
�--� To make one extra mortgage payment annually, divide your usual payment by 12 and that amount to your regular monthly payment.

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