There are always advantages to prepaying your existing debt. One of the most obvious benefits of prepaying your debt, especially on a mortgage is that you are going to pay off your home faster. This will result in more money out of each paycheck going to something else, whether it be travel, other bills, a new car, whatever. The idea is that you are going to be able to have a much bigger comfort zone paycheck to paycheck once the house is paid off, so living a little bit tighter each paycheck can have huge payouts.
You also have to remember that paying down your mortgage sooner can be a huge savings on the house as well, because you are eliminating some of the costs associated with the loan, such as interest. Assume that you have a 30 year mortgage and you are paying 5% per year on it, and you decided to pay off $5000 extra this year, this will save you $250 per year. On a 30 year mortgage that you just started paying on, this would result in an overall savings of $7,250. So by paying off $5,000 early, you are actually paying off $12,250 of you mortgage early. This obvious is a huge savings, it’s almost like you are being matched for every dollar that you put into the house more than the actual cost of the mortgage. This is especially true the earlier on that you begin making extra payments, as it will result in the most timed interest savings.
Another advantage of prepaying your mortgage is that it allows you to pay off your house while it is newer, giving you a better opportunity to sell it for full value and collect a larger chunk of money from it. This method would result in a much bigger retirement as you move from one house to the next, as long as you transfer all of the funds made off of the sale of the house to the next mortgage. This is how many people retire as millionaires, even though they realistically aren’t making a lot of money each year.
If you live smart and plan ahead, you can really make a huge difference on your overall financial future and prepaying your home mortgage can play a huge part in this planning.