Should You Pay Off Your Mortgage Early?
Paying off your mortgage early sounds great, but there are a few things to check first — other debts, penalties, retirement savings, and your cash cushion.
Pay off higher-interest debt first
If you're carrying credit card balances or an auto loan, tackle those before throwing everything at your mortgage. Credit cards charge way higher interest than your mortgage does, so any balance you leave sitting there will keep growing.
Plus, the interest on credit cards and car loans isn't tax deductible — unlike mortgage interest in some cases. Pay down the expensive stuff first.
Check for prepayment penalties
Some mortgages come with a prepayment penalty if you pay them off too early. Before you make that final lump-sum payment, check your mortgage agreement to see if you'd be dinged.
Run the numbers. If the penalty is steep, it might not make sense to pay off the whole thing right now.
Make sure your retirement plan is funded
Before you zero out your mortgage, take a look at your retirement savings. If you don't have a plan set up yet, start one — they come with tax advantages that work in your favour.
Once you've got a solid nest egg going, then paying off the mortgage can move up your list. A paid-off home and a healthy retirement fund? That's a pretty good way to start the next chapter.
Watch your cash flow and emergency fund
Paying off your mortgage sounds like it has no downside, but there are a few things to think through. Will making those extra payments squeeze your savings? What about your emergency fund?
Your overall financial health matters. Being mortgage-free feels great, but not if it leaves you tight on cash when something unexpected comes up.
Once you've weighed it all, move forward
After you've reviewed your debts, penalties, retirement savings, and cash cushion, make the call that works for your situation. Being mortgage-free — or well on your way — is a fantastic milestone.
The bottom line: do what makes you and your family comfortable. If early payoff fits your bigger financial picture, go for it. If not, that's fine too.
Matt Broom-Hall · Founder & Mortgage Broker · Say hello →
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