Mortgages can be a pain the neck sometimes, especially when the property has a high rate of vacancy. Most people will tell you that the longer the mortgage payment plan the fairer the deal is, but even if you are paying in small chunks does not make the expense any smaller. In fact, the longer you pay your mortgage the more expensive it gets.
But there are so many other benefits that you get when you pay your mortgage early. In this article I will highlight just five reasons you should pay your mortgage earlier.
You own it
You might think that you already own the house because you are living in it, but the truth is before you pay your mortgage in full, even if you don’t default in your monthly remissions, you still live with that perpetual fear of losing the property to the bank if anything happens and you can’t pay as promptly as you thought.
The loan associations or banks that lend to you, hold the title to the property and you must deliver by paying the mortgage in full to have the peace of mind and call yourself a property owner and…
It increases Cash flow
Mortgage payments take the largest chunk of property revenues every month.
Before clearing the mortgage, you can’t even have a proper investment or meaningful savings. Clearing your mortgage reduces your monthly expenses— in the long run and leaves you with a lot of money to invest in other businesses.
Also, with cash flow, you can also improve your property value which should always be the next phase of property investment after acquisition.
You save on Interest
While it is true that the principle forms the real headache of mortgage payment, interests on the principle will pile up to tens of thousands if you stretch time.
Paying earlier saves you a lot on the interest. The simple logic is, the longer you pay the mortgage, the higher the interest that accompanies it. It is because of high interest that most property buyers opt to pay for their properties in upfront.
Easy access to loans
The real estate business thrives so much on loans. As a real estate investor you always find numerous opportunities that would pay so much in the long run but require large sums of money to jumpstart.
For example, you might bump into a rundown apartment in a cheap neighbourhood with promising returns, but if you have a huge loan, your credit score will not be favourable, you become a huge risk to lenders.
Clearing your mortgage improves your credit score and make it easier for you to access other crucial loans.
You become risk-averse
While most entrepreneurs will shun risk averse investors, being risk averse is an instinct many investors have thrived on.
When clearing your mortgage early becomes a priority you become blind to high risk investments that may sway you off the path. In the end you clear your mortgage early and say “Now bring it on” because you are now free to invest in high-risk ventures without the fear of losing your home.
In conclusion, there are so many benefits of clearing your mortgage early, but it is also good to assess your financial realities. If your revenues aren’t sizable, then it makes perfect sense to pay in small amounts over a long period of time— this will be expensive in interests, but it will be easier to your financial realities than committing huge finances that cripple your other facets of life.