When you’re in the process of paying off your mortgage, there is a lot to consider. When you’re paying off your mortgage, there are plenty of things to keep in mind. When you are at this point in your life, there are changes happening. Your financial situation will change because your mortgage payments will be freed up.
To help you get started, here are 5 things to think about when paying off your mortgage.
Find out if you can pay off your mortgage early
First, you should make sure you are able to pay off your mortgage early. The best way to do this is to talk to the mortgage company. Some of these companies can be particular about how you pay off your mortgage. Some allow you to pay extra during certain times but not all the time. Others may charge penalties for prepayment. This is important to keep in mind because it can determine whether you pay off your mortgage early. The last thing you want it for your biggest move to be one that penalizes you financially.
Determine what type of life insurance you need
When you pay off your mortgage, your needs change. Things aren’t the same as they were when you did have a mortgage to pay for. The top reason that people get life insurance is to help cover financial costs in case of their death. If you pass away, your family will be left with the financial responsibilities that you might have covered with your income. If your mortgage is paid off, that expense does not need to be covered by life insurance. For this reason, you can choose less coverage or a different type of policy. By the time you pay off your home, you may be well over 50. According to Over50lifeinsure.com, your life insurance needs can look completely different after the age of 50. They state that with your kids growing up and your mortgage paid off, it is more likely that your purpose for life insurance will be more legacy related, rather than pure income replacement.
Make sure you have an emergency fund
Sometimes, if you are in the process of paying off your mortgage, you may put all of your money into that. This can leave people with no money in case of an emergency. Slow down your plan for paying off your mortgage temporarily while you build up an emergency fund. Though it may slow you down temporarily, it is important. When you have an emergency fund, you won’t have to take out loans or use a credit card in an emergency. With the newly freed-up budget, this should be easier to accomplish now. If you haven’t been able to save money before, make it an effort to do so now.
Figure out what your financial goals are
For some people, paying off their mortgage is not a big goal. You should sit down with your partner and figure out where you want to be financially. Paying off your mortgage may be one of your top goals, but there could be goals that come before it. Prioritize what you hope to do financially. If paying off your mortgage is a part of that, there’s no reason to wait. You might choose to pay off student loans or save up a lot of cash before paying off your mortgage.
Decide what to do with the extra money
Since you won’t be paying for your mortgage, what are you going to do with the money? Depending on where you live and what your mortgage payment was, you may free up a lot of money from your paycheck. You might choose to invest or spend the money. Whatever you choose to do, you should have a plan. Otherwise, it can defeat the purpose of freeing that money up anyway.
Paying off your mortgage can be a big financial step in the right direction. Before you make any major decisions, especially with your finances, it’s a good idea to do your research. Give it some careful consideration to ensure you’re making the right choice. Think about how it will affect you presently and into the future too.
Get Used to Your New Life
Paying off your mortgage can be a huge weight off your shoulders. Many people pay their homes for decades and accept it a part of their life. Once your house is paid off, you will have a huge sense of relief. Not only is your budget freed up, but so is the stress of not fully owning your own home. Many couples use that extra wiggle room to take off and travel the world, start a business, or invest in that hobby that they always wanted to pursue. Congrats on getting to your goal, make the most of it!