The largest loan in a borrower’s portfolio is typically the mortgage. Home loan equated monthly installments (EMIs) can take a significant portion of your salary, hurting your whole budget and making you anxious in the face of uncertainty, even while they help you grow an asset.
The earlier you pay off your mortgage, the better.
Here are five justifications for why it makes sense to prepay mortgages.
Let’s dive into the details and discover the benefits of early home loan repayment.
Reduced interest burden:
Closing your home loan early allows you to save a substantial amount of money on interest payments. By accelerating your repayment schedule, you minimise the interest accrued over the loan tenure. This can result in significant long-term savings, allowing you to redirect funds towards other financial goals or investments.
Improved creditworthiness:
Being debt-free, especially when it comes to a significant liability like a home loan, enhances your creditworthiness. Paying off your loan ahead of schedule demonstrates financial discipline and responsibility, positively impacting your credit score. A higher credit score opens doors to better borrowing opportunities in the future and can help you secure favourable terms for other loans or financial products.
Enhanced financial flexibility:
Eliminating the burden of a home loan equips you with greater financial flexibility. With the monthly loan installment no longer a concern, you have more disposable income at your disposal. This newfound financial freedom allows you to pursue other goals such as investing in assets, planning for retirement, or exploring entrepreneurial ventures. It also provides a safety net during uncertain times and gives you the freedom to allocate funds as per your priorities.
Peace of mind and home ownership:
Early repayment of a home loan brings a sense of security and peace of mind. The satisfaction of fully owning your home without any mortgage debt is invaluable. It provides stability and eliminates the worry of defaulting on payments or the possibility of foreclosure. Moreover, living in a mortgage-free property provides a sense of achievement and financial stability for you and your family.
Potential investment opportunities:
By closing your home loan early, you free up additional funds that can be utilised for investment purposes. These funds can be channeled into various investment avenues such as stocks, mutual funds, real estate, or starting a business. Investing these surplus funds wisely can potentially yield higher returns and accelerate your wealth-building journey.
From reducing the interest burden and improving creditworthiness to enjoying financial flexibility and peace of mind, there are numerous benefits to closing your home loan ahead of schedule. Additionally, early repayment opens up avenues for further investment opportunities, enabling you to grow your wealth and achieve your financial goals. Carefully assessing your financial situation and considering these factors can help you make an informed decision regarding early home loan closure, paving the way for a more secure and prosperous financial future.