Is there a "down side" to paying off a mortgage early?

[annabanana]

Mr. Banana will be retiring in 3 years.. the same year our youngest finishes college. We've started making payments to principle that will close out our mortgage that same year. I know we won't get the interest deduction on the taxes... but what else will we have to watch out for?

[DrDan]

1. we paid off our mortgage years ago . . .

have never regretted it . .

I know - others will argue there are better ways to invest that money, but peace-of-mind and the freedom of being mortgage free are worth it.

[CaliforniaPeggy]

2. It's been awhile since we did that...

But IIRC, some banks do (or did) charge penalties for paying it off early...

That was a long time ago, however...

Check with your lender for details...

And good luck!

It's a great feeling, having that burden done with!

:hi:

[petersjo02]

3. I agree

Pay it off. The amount you save in taxes is tiny compared to the amount you are continuing to pay in interest. Do it and look forward to having more money in your pocket.

[mitchtv]

4. we never found one

And when it came time to move, we took a home equity loan to buy the new one outright, and paid that off as soon as we sold the first. It sure makes retirement easier.

[Xipe Totec]

5. I don't see a down side

When interest rates plummeted two years ago, we refinanced our house. Rather than reducing the payments on the mortgage, we switched from a 30 year to a 15 year mortgage and kept payments the same.

As a result, we'll be done paying off our mortgage 7 years early.

The tax benefit from a mortgage only makes sense if house prices are rising. In a stagnant or dropping housing market you're just paying a buck in interest and getting back at most 30 cents.

[MercutioATC]

6. You lose your mortgage interest deduction...that's it.

Unless you have a prepayment penalty (most mortgages don't, and your lender can let you know if you do) paying off your mortgage is great.

[Bonobo]

12. Not necessarily a small thing. Deductions can be very important.

[DemReadingDU]

14. When we started paying off our house, the interest to be deducted

the interest deductions were so small, we could no longer itemize. Our kids were grown, so literally, we had no deductions, other than property taxes.

[we can do it]

17. Another Deep Thought, You Get Maybe 30 Cents Back For Every Dollar Spent

on interest. The bank wins, you lose.

[nightrider767]

21. Good Point, But,,,

Don't forget. As you approach the end of the loan, you pay little interest. Most of it is principal. So that may be a mute point if you are in the last 30 or 40% of your payments.

Take care.

[DemReadingDU]

7. we paid ours off 5 years ago

never regretted it

We take the standard deduction now for taxes. Kids are grown, no mortgage interest, nothing to deduct anymore.

It's great, 1 less payment every month.


:)

[Warpy]

8. Unless you dealt with an unethical lender who put

a prepayment penalty into the fine print (highly unlikely), there is no down side.

If you're that close to paying off your mortgage, you're already paying more principal than interest, so your tax benefit is minimal.

You'll get used to doing the 1040EZ really quickly. I promise.

[momster]

9. Double Check

that there is no penalty for paying early (shouldn't be with only 3 yrs left to run).

Make sure that when you do pay it off that you receive all the paperwork you are entitled to receive, including a clear title. Do *not* have a mortgage-burning party, unless you burn a copy.

Check all three credit reporting agencies to be certain that there are no little surprises hiding therein. (Everybody should do that once a year anyway.)

[DemReadingDU]

13. actually, we only received a letter that our mortgage was paid

We did not receive the deed.

So I called the county courthouse, and eventually I was routed to a person at the Recorder's office who said the deed/title was given to us when we bought the house. Sure enough, I went thru all the house papers, and found the deed!

But the County Recorder told me I was really looking for the form called 'Satisfaction of Mortgage'.

This was online at the County Recorder's office, signed by 5 different people and notarized. I printed out a copy for my records.

[fenriswolf]

16. ROFL

Link!

[Hekate]

10. We prepaid all along & finished 6 years ago. Just keep track of how your payments are being recorded

You just want to be sure that your prepayment is recorded against the principle.

Mr. H is a bit obsessive about checking things like that, and it turned out to be a good thing. He's also very, very kind when he explains to confused clerks how their own accounting system operates.

Best of luck to you!

Hekate

[napi21]

11. We moved from PA to GA 8 years ago, and we had enough equity in our old house

that we managed to pay cash for the one in Ga. It's GREAT not having that darn mtg. payment every month. The only thing you have to remember is to make sure you save enough $$ to pay your real estate taxes & Insurance once a year. After having the lender put those in escrow for so many years, it teek me a few years to get used to the bill coming to US!

[NMDemDist2]

20. we did the same in 2006 (different states, same scenario)

I love having no mortgage.

but that insurance bill every quarter did take some getting used to, luckily our taxes are less than $100 a year total so they're no trouble LOL

[demnan]

15. My goal is to pay mine off before I hit 65

And if I have my retirement money and just the condo fee I mignt feel safe.

[Captain Angry]

18. A thought on not paying it off early.

Mortgages are leverage. If you can use somebody else's money for your own needs, it can be a profitable process.

If you can use the money that you'd use to pay down the mortgage for something more profitable, you're making money.

For instance, if you have a 7% mortgage, but can use the money to generate 12% returns, you're ahead.


Some people are advocating using the low mortgage rates to buy properties that will produce far higher returns on the investment. For instance, solid rental properties that will not go unrented.

Not advice, just letting you know that there are other sides to the issue.

[annabanana]

19. Thank you all!!

I feel better. The pre-retirement jitters have gotten under my skin. I seem to be perpetually convinced that I'm about to go over an expensive cliff out of ignorance.