If you’re considering applying for a mortgage to purchase a home, you can expect a long-term commitment. A 2015 survey found that despite 15-year mortgages being available, 86% of mortgage applicants opted for 30-year loans.
With a 30-year loan, the borrower pays back the principal (amount borrowed to pay for the home) along with interest (amount the lender charges for lending money) for the next 30 years.
Because of the long timeframe needed to pay back a mortgage, homeowners (and homebuyers) often wonder about paying a mortgage off faster. After all, what could be bad about owning your home outright and no longer having a mortgage payment?
There are benefits from paying off a mortgage early
Paying off your loan early offers some powerful benefits. Because you no longer have a monthly mortgage payment, your money can be freed for other goals, such as building retirement savings or investments.
Though you still have to pay homeowner’s insurance, property taxes and homeowners association fees, homeowners can appreciate the debt freedom gained by paying off their mortgage early.
Paying off a mortgage early also has negatives
Becoming “debt-free” from paying off a mortgage early has its drawbacks. These include:
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