Should I Pay Extra Against Principal
When should I make an extra payment on my mortgage loan principal?
This question often arises when homeowners have new financial circumstances such as more income or a windfall such as from an estate.
The answer is not automatically to pay it against your home mortgage. You may decide to use part or all of it on the mortgage but only after consideration of a very important factor - future emergencies.
Consider placing all or part of that money that you would put toward paying off your mortgage early into a savings fund. The primary benefit of this approach is the money will remain liquid to you for purposes of your choosing as opposed to being tied up in home equity which cannot be accessed. And, secondarily, paying off a mortgage early will often significantly lower or eliminate your mortgage interest tax deduction.
If you already have funds to cover any possible financial circumstance such as loss of job or unexpected emergency, then by all means, pay off or pay down your mortgage. If not, retain the financial flexibility for yourself by setting up the savings fund. You can always decide at some point in the future to pay extra against the mortgage should you feel that is the best use for the fund at that time AND, in the meantime you have peace of mind.
This question often arises when homeowners have new financial circumstances such as more income or a windfall such as from an estate.
The answer is not automatically to pay it against your home mortgage. You may decide to use part or all of it on the mortgage but only after consideration of a very important factor - future emergencies.
Consider placing all or part of that money that you would put toward paying off your mortgage early into a savings fund. The primary benefit of this approach is the money will remain liquid to you for purposes of your choosing as opposed to being tied up in home equity which cannot be accessed. And, secondarily, paying off a mortgage early will often significantly lower or eliminate your mortgage interest tax deduction.
If you already have funds to cover any possible financial circumstance such as loss of job or unexpected emergency, then by all means, pay off or pay down your mortgage. If not, retain the financial flexibility for yourself by setting up the savings fund. You can always decide at some point in the future to pay extra against the mortgage should you feel that is the best use for the fund at that time AND, in the meantime you have peace of mind.
Posted by Clare Zickuhr at 8/17/2009 12:48 PM 
Categories: extra payment early
Tags: payment principal extra
Categories: extra payment early
Tags: payment principal extra
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