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Should I pay off my mortgage early?

When you own a home, the thought of a mortgage looming over your head for decades can be daunting for many people, so it’s natural to want to pay off your mortgage as soon as possible. Before you decide to use an inheritance, raise or your savings to pay off your mortgage (or even before you decide to make extra payments ), it’s important to determine whether it really makes financial sense for you.

In some cases, the amount you save on interest when you pay off your mortgage might not be more than what you would earn if you put the money to work elsewhere. On the other hand, sometimes it’s not about the return on other investments and more about peace of mind or freeing up cash flow for other opportunities.

Pros and cons of paying off your mortgage early


  • Eliminates your monthly mortgage payment, freeing up cash flow that can be useful, especially during retirement

  • Saves you money on interest, potentially thousands of dollars

  • Can receive a predictable rate of return, equal to the interest rate on the balance you’re paying off

  • Grants peace of mind knowing you own your home outright

  • Can tap the equity in your home if you need money later


  • Ties up a good chunk of your liquidity and net worth in your home, which might make it harder to access later

  • No longer eligible for the federal mortgage interest tax deduction

  • Could miss out on potential higher returns from other investments

  • Might not realize as much from your home as you had hoped if the market drops and you have to sell quickly

How to pay off your mortgage early

If paying off your mortgage early is right for you, here are some strategies from Dream Homes by Roberta how to do it:

  • Make biweekly payments. One way to get started with making extra mortgage payments is to set up a biweekly schedule. This amounts to making a full extra monthly payment each year and can reduce the time spent with a mortgage. Starting with biweekly payments can help you get ahead on your mortgage while allowing you to keep working toward other financial goals.

  • Make extra mortgage payments each year. Similar to making biweekly payments, you can simply make an extra mortgage payment once a year, or pay an additional amount each month ($250 more, for example) on top of what you already pay. Be sure to coordinate with your lender so that these extra funds are allocated to the principal.

  • Refinance to a mortgage with a shorter term. If you stand to get a lower interest rate, refinancing to a 15-year mortgage means you’ll pay off the loan sooner. Keep in mind that even with a lower rate, you could be paying more each month, since your payments are now spread out over a shorter period of time.

Bottom line

When considering whether to pay off your mortgage early, it’s important to figure out what works best for your situation and is most likely to help you reach your short- and long-term financial goals. Sometimes, with financial planning, it’s not a straight assessment of what’s best by the numbers. People want to feel good about where their money is going — no matter what the spreadsheet says.

For some, owing money causes stress, and paying off a mortgage early can bring peace of mind. For people nearing retirement, a paid-off mortgage means they have that much more free cash flow from their fixed income when they stop working.

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