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Should you accelerate mortgage loan payments?

Many Americans have slashed their spending and are doing without in order to pay off debt and lessen the effects of the troubled economy. Paying off mortgage loans early has become more popular, something that many financial experts have traditionally advised against.

Getting free of a mortgage

The argument for accelerating payments on a home mortgage is that you build equity faster and ultimately will own it free and clear of any debt obligation. You will always have the security of knowing that the place is yours as long as you want it to be. Paying off a home mortgage in full also would likely free up a significant chunk of your income, allowing you to have more control and freedom to use it for other purposes.

Using income for other investments

Those who are against accelerating mortgage payments often cite the loss of the mortgage interest tax deduction. They also point out that instead of putting extra cash toward a home loan, the money could be invested in mutual funds or other investments that may earn you more money. Also, during the years when you are accelerating mortgage payments, you may have less income to put toward other things.

Biweekly mortgage payments

Before you starting attacking your mortgage debt for a faster payoff, learn as much as you can about the various methods. Biweekly mortgage loan payments can allow you to pay off a 30-year mortgage about six years ahead of schedule. Instead of making mortgage payments once a month like a lot of borrowers do, you make a payment every two weeks. So instead of making 12 payments a year it works out to 13 payments.

Most mortgage lenders allow biweekly payments, but usually charge a fee to set it up. Skip the fee and set up your own biweekly mortgage payment plan. Check with your mortgage lender to see if you can send half of the payment every two weeks. If the lender won’t allow it, divide the monthly payment by 12 and add that amount to the payment on the principal each month.

Use cash windfalls

Use bonuses and other cash windfalls to pay down mortgage debt. Make sure you don’t need the money for other expenses that are more pressing than paying off a mortgage. For instance, putting lump sums of cash toward credit card debt can wipe out high interest payments, which would give you a better return on your money than paying off low interest mortgage debt.

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