Fast Mortgage Payoff Information

Fast Payoff

There are certain considerations when thinking about whether you should opt for a fast payoff of your mortgage loan. If you don't use your extra income to repay your mortgage, how would you use it?

Some of the things that you could do with your money include having more children, travel the world, or buy a yacht. These are investments that yield no direct financial return so they are not sound investments. They reflect life-style decisions only you can make.

If you plan to invest the money for a financial return, compare the risk and return from prepaying your mortgage against that of other investments. The return on prepaying the mortgage is the interest rate on the mortgage. This method includes zero risk since you are paying yourself. A fast payoff of your mortgage is clearly a better alternative than putting the extra income in a bank or money market fund where it would earn only a small percentage.

However, if you choose to invest your money in a diversified portfolio of common stock then this option might be more fruitfull in the long run. This only makes sense if you are prepared for the risk of short-term fluctuations in portfolio value. A diversified portfolio is a reasonably prudent risk, provided you are in your 30s or 40s and plan to stick with it over the long haul.