Fixed rate mortgage

Traditional mortgages are structured over a 15 or 30-year-year span of time and usually require a monthly payment. If you want to reduce the overall interest you pay on your mortgage, paying off your mortgage early can be beneficial. However, based on the level of risk you’re comfortable with, early payment of the mortgage can prove to be a disadvantage. Following are the pros and cons of paying off your mortgage early to help you decide.


  1. Reduce overall interest

By paying off your mortgage early, you will pay less interest over the term of the loan. On most occasions, the savings you acquire from the reduction in interest is quite significant. In addition, you also have increased equity that can benefit for other expenses and purposes should you require it.

  1. Free your cash flow

Without the requirement of monthly payment, you essentially allow for free cash flow. With added benefit, you will lower your expenses in retirement.

  1. Peace of Mind

It is irrefutable that once you complete paying off your mortgage, it is a weight off your shoulders. You no longer have the financial strain that requires you to save money for paying off the mortgage. The peace of mind that comes with being debt free is enviable and a key motivator in paying off the mortgage early.

There are, however, certain drawbacks to paying off your mortgage early.


  1. Tax deduction

One of the key drawbacks to paying off your mortgage early is losing the mortgage interest tax deduction. The interest eventually declines as the principal increases, so eventually, the amount of savings you acquire is going to reduce.

  1. Decreased liquidity

It must be highlighted that using your cash to pay off your mortgage could disable you from investing in other options that have significantly better returns compared to the savings you acquire from paying off the mortgage quickly. For instance, if you have children that you are sending to college or run a business or are looking to start one, having cash at hand could prove to be more beneficial than paying off a mortgage. There is a definite risk factor associated with decreased liquidity.

  1. Credit profile

Having a mortgage payment every month builds a better credit profile. Your credit report measures your ability to pay back debts. Although your credit profile will initially take a hit once you start paying off your mortgage, over time the profile will significantly improve with continuous payment to debts. The temporary lowering of score could last up to six months. To ensure that your credit profile is not adversely affected, you must pay the mortgage on time. Your score will eventually rise once it is evident that you are a responsible borrower.

  1. Extra charges

Some firms charge a prepayment fee for paying off your loan ahead of schedule. Prepayment fees can be checked prior to proceeding with the mortgage.


After careful consideration of the pros and cons of paying off your mortgage early, you can weigh each option against your own personal financial portfolio. Depending on your current investments, debts, credit score and other responsibilities you can decide on the right path to follow.

One of the methods that can help determine how much you can save in terms of interest is the mortgage loan calculator. Using this to calculate your potential savings through mortgage versus other investments can be a beneficial start to deciding on a plan of action.

In addition, it helps to put into perspective the advantages of owning a house that is completely paid for.

With these factors in mind, you can make an informed decision on the status of your mortgage repayment.