Should You Prepay Your Mortgage?

If you are fortunate enough to be in the position where you have all of your unsecured debts paid, you may want to consider paying your mortgage ahead or as the financial industry refers to it, prepaying your mortgage.

The benefits to prepaying your mortgage are:
• You will retain more of your money. The average mortgage will cost you two to three times the initial loan amount just in interest. That is money that will stay with you if you prepay instead of going to your lender.
• You will own your home sooner by prepaying the loan.
• Having equity in your home gives you more options. If you need to borrow money for any reason you can get a home equity line of credit at a reasonable interest rate

The disadvantages to prepaying your mortgage are:
• When interest rates are low, like they have been in recent years, you do not get a big return on prepaying your mortgage, but you are still farther ahead by paying your mortgage then you are by putting the money in a savings account.
• You may lose some of tax deduction options by prepaying your mortgage and as a result paying down your interest.
• You may want to have the equity in your home available to you through a home equity line of credit. When things are going well for you financially, home equity lines of credit are easy to get, but if you are experiencing financial hardship, a home equity line of credit may not be that easy to get. So, a home equity line of credit may be something you want to have in place before it would become necessary.

There is a lot to consider when it comes to prepaying your mortgage, but it is wise to have all other debt paid first, except for student loans. All other debt will normally have a higher interest rate than your mortgage.

Marjorie Salada is the owner of debtmanagement1.com, a website that contains information on debt consolidation, debt settlement, debt counseling and how to manage credit card debt.