Buying a home is often the biggest investment you’ll make, which is why many buyers can’t make that investment without a mortgage.
Most mortgages have pay-off terms that range from 15 to 30 years. That’s a long time to be paying off a loan, so some people take steps to pay it off more quickly, making extra payments throughout the year and/or making higher mortgage payments each month.
But what, exactly, are the benefits of paying down your mortgage more quickly than your loan terms require?
A recent article from realtor.com outlined some key reasons it may be a good idea to prepay your mortgage, including:
- You’ll save on interest. The longer it takes to pay off your mortgage, the more interest you’ll pay. As such, a major pro of prepaying your mortgage is that you’ll save on interest, which can add up to tens of thousands of dollars over the life of the loan.
- You’ll build equity faster. The more you pay down your loan, the more equity you have in your home. Therefore, making extra payments on your mortgage helps you gain equity in your home more quickly, which can be a huge benefit if you ever need a home equity loan, or home equity line of credit (HELOC).
- You’ll pay off your home sooner. Many people find being in debt stressful. Prepaying your mortgage allows you to pay off your home sooner, and get out of debt in the process.