Should You Pay Off Your Home Loan Early?
A couple of things to remember if you pay down your mortgage by adding extra principle to your payment. 1) The interest that you can write-off on your taxes will become less. 2) The amount that you use to pay your mortgage down will not reduce your payment if you are on a fixed-rate mortgage. 3) The money that you put in your mortgage may be needed for an unforseen emergency or for investments. To get the money back, you would have to borrow against your house and that will cost you extra money. That is why we often refer to this as 'dead equity.'
The advantages of pre-paying some of the principle is somewhat apparent. If you paid an extra $100 per month, you will save alot of interest and a good number of payments. I just ran an amortization for a mortgage amount of $329,250, where by paying an extra $100 per month, saved them over $83,000! A lump sum payment in the beginning of your loan, will also improve the amount of your payment that goes to your principle versus interest.
Paying down your mortgage to 80% of your home's value can save you money as well in your monthly payment by being able to drop the PMI. This usually only involves an appraisal. Each lender may have other restrictions, so check with them.
If your money is used instead on your house, make sure you are doing the right things to increase value. Your Realtor can help you with that. Sometimes, it is best to not do anything based on the location and the neighborhood. Your Realtor can help you with that decision as well.
Every person's situation is unique. Consult with your Realtor and your Financial Planner.