Benefits of Shortening My Payment Period
Most people would rather be out of debt sooner rather than later. However, the benefits of shortening your repayment period may not be as obvious as they seem. Here are some additional benefits to reducing your repayment period that you can factor into your decision.
- Pay less total interest: In general, the shorter your loan term, the less you’ll pay in total interest. Keep in mind that this doesn’t mean your interest rate will be lower – but your total interest payment, once the loan is paid off, will be less. Depending on your loan terms, this savings may be considerable.
- Lower your overall debt load: Paying off your home loan more quickly can give you more flexibility for expenses down the road, such as retirement or college payments.
- Force yourself to save: Some homeowners see a shortened repayment period as an opportunity to “force” themselves to put extra money toward their property each month. They regard the reduction in total interest to be part of a savings plan.
- Leverage your home as an asset sooner: Owning your home quicker can make it available to you as a fully owned asset that can fit into your overall financial planning.
- Make your retirement plan work better for you: A strategy for some homeowners nearing retirement is to make higher payments on their mortgage while they’re still working, so they won’t face a monthly mortgage payment after retirement.
- Realize intangible benefits: It may not be a factor you can work through on a calculator, but many people simply want the sense of security that comes from home ownership as soon as possible. This is a strong motivator, especially when the calculations support this goal.
Don’t overlook another potential savings area, PMI. If you home’s current market value has increased and you can reduce your loan-to-value ratio below the lender’s threshold for requiring PMI, this could allow for a monthly savings.
Ready to run the numbers? An experienced loan consultant can also discuss benefits and factors to consider whether reducing your repayment period will work for you. Call (800) 210-8849.