Choosing to Pay Off Your San Diego Mortgage Early

Is it better to pay off your San Diego, California mortgage early, or to save and invest the extra money? This is a common question posed to San Diego mortgage lenders.

Some people argue that it makes more financial sense to invest extra savings in the stock market than to pay off your mortgage early. In our current economy, however, investing in the stock market is a risky proposition. Unless you are aware of a guaranteed DOW pay-off, you could be better off putting your money in a less risky investment - your home.

Though investing in the stock market can create longer-term liquidity because your savings are not tied up in your home, pre-paying your San Diego mortgage can be extremely beneficial. Here's why.

Remove Your Most Costly Monthly Expense
For most San Diego homeowners, a mortgage payment is their largest monthly expense. By paying off your largest monthly expense, you'll have a larger chunk of change when you retire.

Drastically Reduce Interest Payments
If you have a San Diego home loan with a high interest rate, it's best to pay it off early. Otherwise, you're just spending your hard-earned savings on accrued interest payments. Studies show that most Americans pay over $10,000 in home loan interest payments every year. Think of how much you could save in the long-term if you paid off your San Diego mortgage early and became free of that smothering interest payment.

A Breakdown of the Figures
Suppose you have a 30-year San Diego mortgage worth $250,000 at 6 percent interest. If you made payments on schedule for 30-years, your monthly payment would be $1,500 for 30 years. Total interest payments, however, would be more than $260,000 over the loan term. That transforms a $250,000 home loan into a $510,000 mortgage!

To reduce accumulated interest, spend an extra $100 per month on your San Diego mortgage. This minor addition reduces a 30-year mortgage down to 25 years, and will save you a lot of money in interest. If you have the financial resources to pay even more, say $500 extra each month, this would convert that 30-year loan to a 15-year loan, saving over $130,000 in total interest!

Noteworthy Guidelines to be Aware of
If you plan to pay off your San Diego mortgage early, be aware of the following important home loan secrets.
#1: Indicate that your extra mortgage payments apply to the principal balance.

#2: If you plan to pre-pay your San Diego home loan, first pay off any debt having higher interest rates, e.g. loans.

#3: Avoid putting all of your additional money into your early mortgage payment. Be sure to keep some emergency cash in a money market fund.

#4: Do not apply for a 30-year San Diego mortgage if you expect to pay it off in a few years. Keep in mind that interest rates are lower on short-term mortgages, so if you think you'll pay off your mortgage ahead of time, apply for a 15-year loan and save time and money.

#5: Before making additional mortgage payments, confirm with your San Diego lender that your mortgage doesn't have a pre-payment fee.

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