The first thought of any person who takes out a mortgage is usually “how fast can I pay this off?” And for rightful reasons, as having a continuous payment to eventually own your house over the course or close to thirty years can be stressful and draining. If you have the ability to pay off your mortgage as quickly as possible, it may seem to be the obvious choice, but there’s a little more to it than that. Here’s the truth when it comes to paying off your mortgage as a current homeowner.
Before going to pay off your mortgage in either additional or larger payments, be sure to consider all other loans you’re paying off simultaneously. For many Irish homeowners, mortgages remain the lowest rates on loans you’ll receive despite being considerably higher than others in the Eurozone. For example, the average interest rate on a mortgage loan in Ireland is anywhere between 2.5 – 3%, while for your car loan can average from anywhere between 8 – 12% typically. This is all to say that your extra money that you would use to pay off your mortgage may be better used towards paying off another loan that has a much higher interest rate.
However, if you have the ability to pay off your mortgage and have a well-constructed plan to handle other financial obligations, such as other forthcoming loans, it is a great idea to get your mortgage paid for and out of the way. It is recommended that you discuss your plans to pay off your loans and in which order with a financial advisor before making any large decisions such as this, as they may have recommendations on the best way to go about it. Paying off your mortgage early can provide you with opportunities to reinvest that money that would otherwise go towards interest payments into subsequent investments and business ventures, such as using it to purchase real estate to make back some of that money spent to pay off your own house.
This is all to say that paying off your mortgage early may not be a bad idea, but only if you don’t see yourself taking on another loan of higher interest in the near future. Due to the current pandemic, despite the aid given out by the Irish government, it may not be wise to take out further loans until times are less uncertain and you can be a bit more confident in your financial status. If you are able to pay off your mortgage quickly, this may open up opportunities to use that money for more expenses or further business ventures.