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March 26th, 2009

Does It Make Sense to Prepay Mortgage Debt?

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Financial experts have long advised against paying off mortgage debt ahead of time. But with the economy in shambles and so many people struggling to make ends meet, prepaying a mortgage could make sense in some cases. Here’s why. 

  1. One of the main arguments against prepaying a mortgage is that the interest payments can be deducted on your tax return. But prepaying your mortgage could allow you to shave thousands of dollars off the total amount of interest you’ll pay over the life of your loan. Also, some states cap the amount of mortgage interest that can be deducted, according to the Seattle Times.
  2. Some people argue that instead of putting extra money toward mortgage debt reduction, people should invest those funds to accumulate a larger nest egg. However, you may feel that paying off your mortgage makes more sense at this time since the stock market has been on a down streak and CDs and Treasurys have pretty low yields.
  3. Prepaying a mortgage can give you financial freedom. Only you can decide how important it is to you to be free of the stress of having to pay for your home every month.
  4. Paying off a mortgage means you’ll be less at risk of losing your home through foreclosure if you lose your job or have a reduction in income.

Personal finance isn’t a one-size-fits-all deal. Don’t set up a mortgage debt reduction plan just because your neighbor did it. If you’re seriously considering paying off your mortgage debt you’ll need to run the numbers to see if it really makes sense for your situation. Use AARP’s mortgage payoff calculator to see how much interest you can save by escalating payments.  

If you need help putting together a plan, get financial counseling from a professional. Any counseling you receive should take into account your specific situation instead of using a cookie-cutter approach. 

About the Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

Post written by Francine Huff

2 Responses to “Does It Make Sense to Prepay Mortgage Debt?”

  1. national debt Says:
    January 27th, 2010 at 4:47 am

    I don’t usually post on blogs but I found yours interesting. Keep up the good work. I’ve enjoyed reading here.

  2. Cherie Crossley Says:
    July 1st, 2010 at 6:47 am

    <a href=”"http://www.homemortgageask.com/" rel=”"nofollow&quot”>Home mortgage</a> interest how calculated?

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  • Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score. Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management. He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others. He can be contacted by visiting his personal site, GoodCreditLiving.com.

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