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Paying Off Your Home Mortgage
By Jo Ellen Fritz   View more articles by this author
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October 21


It can seem like an overwhelming goal due to the size of the debt, but paying off your home mortgage early is possible.  Yes, you get a tax deduction for the mortgage interest on your tax return and yes, mortgage rates are at all-time historical lows.   Yet those individuals I talk with who have their home mortgage paid off early enjoy less stress during retirement without the expense of a monthly home mortgage payment. Those who have paid their home mortgage off early learned a long time ago that paying a dollar in mortgage interest to save twenty-five cents in income taxes was not for them.


First, determine your timeframe for when you want to have your home mortgage paid off.  If you have 29 years left on your 30 year mortgage and you are currently age 45 that means paying at your current rate you would have your home paid off at age 74.  If your plan is to retire from full time employment at age 70 then you would need to accelerate the payoff by at least four years.  


Second, make a list of what other debts you have.  If you have $10,000 in high interest consumer debt on credit cards or from an auto loan, then paying off those debts first makes the most sense.  You need to visit how you got that level of consumer debt and establish a plan for avoiding it in the future.  Do you have an adequate emergency fund of cash set aside?  If not, then build that up before you work on prepaying your mortgage.


Take a long hard look and decide if the house you are currently living in is one that you can afford.  Did you overextend yourself when you purchased this home?  Just because you qualified for the mortgage doesn’t mean that you are comfortable with the payment.  You may decide that you have too much house and determine that it is time to trade down in price.  Selling your home might be your priority at this time as opposed to prepaying the mortgage.


Finally, run the calculation to determine how much additional money you need to pay each month to get your mortgage paid by the date you have determined. You can find numerous calculators on the internet by searching for mortgage amortization calculators.  Set up your new mortgage payment amount to occur automatically so that you stick to the plan.  Make sure that you lender knows that the extra amount is to be applied towards the loan principal and not as an extra deposit to your escrow account. Then you can sit back and watch your mortgage balance begin to disappear.


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