How to Decide if You Should Pay Down Your Mortgage Faster?

Many homeowners come to a point where they have to decide if it will benefit them to pay down their mortgage faster.  While this can benefit some it may not for others.  There are certain things that should be taken into consideration when making this decision. 

The first and most important thing to consider when making this decision is whether or not you can afford it.  If putting more money towards your mortgage is going to break your bank it is probably better to not do so.  You should only consider this option if you can do it while still covering all the rest of your bills and still have money to put towards savings and retirement funds.

One thing to consider is if refinancing your mortgage in an effort to pay it down faster makes sense for you.  For example if you currently have a 30 year fixed mortgage but could afford the payments on a 15 year fixed mortgage you may want to refinance if you can obtain a lower interest rate on the new mortgage loan.  If you can this will allow more of your monthly payments to be applied toward the principal of the loan as opposed to the interest.  It will also allow you to pay down the mortgage faster and work towards the goal of owning your home outright.

Another thing to consider is just adding some money to your current monthly mortgage payment to be applied to the principal of the loan.  This will allow you to pay off the mortgage faster.  The nice thing about this option as opposed to refinancing is if unexpected expenses come up you can skip a month of putting extra money towards the payment if necessary.  You will want to make a note in your payment that the extra money should be put towards the principal and not the interest.

It is important to remember that as you pay down your mortgage loan you will see less and less of an income tax deduction because you will be paying less toward interest.  You will want to factor in the difference this will make in your taxes when considering your options.