Is it Worth Paying a Mortgage off Early?

A mortgage can be a really big amount of money and take a long time to repay. This means that you could be repaying it every month for thirty years. It can feel like a huge debt and something that you would like to repay early so that you can save money and no longer have to worry about it. However, there are advantages and disadvantages to paying a mortgage off early and it is worth giving it some hard thought before doing so.

If you have other loans, they may be more expensive than your mortgage. Compare the interest rates and you will find that your overdraft and credit card as well as store cards will be more expensive with regards to the interest payments than a mortgage and so it could be a lot more sensible to pay these off before worrying about the mortgage.

Before you start to make some overpayments, make sure that you work out whether this is allowed by your mortgage company. Talk to customer services and find out as there may be a mortgage overpayment fee. This means that you could end up paying a significant sum of money as a penalty before you even start to make any repayments and you will need to calculate whether you think that this will be worthwhile or not. It will depend on how much the fee is, how long you have left on your mortgage term and how much extra you plan on paying off and what a difference that will make to the interest that you pay over the remaining term.

It is worth making sure that you will be able to manage in the future as well. If you start paying off lots of the mortgage and then find that you are short of money and need to borrow some, then this could possibly end up being more expensive in the long run. It is therefore worth thinking about how well off you expect to be in the future and whether you think you will be pleased or regret paying extra money off the mortgage.

Of course, usually if you pay a mortgage off significantly early you will save all of the money that you would have been paying in interest over the remaining term. This could add up to a huge amount of money, but it all depends on the interest rates. While interest rates are low the amount that you pay in total is a lot smaller than when interest rates are high. Although you save less when interest rates are low, it is easier to pay it off more quickly as you are not paying out so much in interest so there is more money available to pay off chunks of the mortgage.

If you do want to pay extra off each month, you will need to work out where that money will come from. It might be that you normally manage to save some money each month and you could put that towards paying extra off the mortgage instead. However, if you do not normally have extra money you will need to think about where you might get that extra money from. You may have to consider how you can earn more money or spend less so that you have extra to do it.

Whether you consider paying off your mortgage early is a good thing will depend very much on you and your personal circumstance. It makes sense that it will be cheaper if you do pay it off early as you will be paying less out in interest and it could help you to feel more relaxed that you do not have this debt and that you own your own home. However, if you have other debts it could be better to pay those off before. You also need to think about how you will manage to pay extra off and whether you are happy with doing this. You may need to spend less on luxury items or even on all items or work more hours to earn more money and you will have to decide whether this is something that you really want to do or not.

Should you Borrow Money to Make an Investment?

There are many enticing investments around and some which are lower risk but still look worth having a go at. However, most investments need a significant amount of money invested so you need to think hard about what you are buying and whether you have enough money or if not where you might get it from.

It is worth understanding more about investments before you take one out. Many people think they are just a bit like savings, but they are actually very different. With an investment, you actually buy something with your money. This could be shares in a company, artwork, jewellery or some types of bonds. There are many different types but there are some rules about investing which tend to apply to all of them. Firstly the value will fluctuate a lot over time and this means that you cannot just keep the investment for a short period of time. Once you have bought the product, you will want the value to be significantly higher when you sell it again. You may have to pay fees when you sell it, perhaps to a broker or dealer and so you want to make sure that you cover the cost of those fees as well as making a profit too. Therefore most investments need to be held onto for a significant period of time. You need to give it time to level out those fluctuations in time and go up in value. Often this will be a good number of years, probably five years minimum maybe tend or even more.

There is a risk with investments as well. As explained, the value tends to go up and down in the short-term, but even if you hold onto the investment for a significant period of time, you should not assume that it will definitely increase in value. There is always the risk that you will lose money, however long you have the investment for. You also need to think about the amount of risk that you are prepared to take. Often you will find that if you take a higher risk, there is a bigger chance that you can make a lot of money, but there is also a bigger chance that you can lose a lot of money. With a lower risk investment, you are unlikely gain so much, but you will also not be that likely to lose as much. Of course, not all investments will follow these rules but it is still worth bearing them in mind.

The fact the investments are risky means that it is always wise to use money to buy them that you are prepared to lose. This means money that you will not need for anything else. This is because if you suddenly need to cash it in because you need the money you could find that the investment has gone down in value and you will not be able to get back all of the money that you put in.

If you borrow money to invest you could find that because you are having to make the loan repayments, you might be short of money. Then if you are and you cash in the investment, you could find that you will get less back and you will also be repaying a loan with nothing to show for it. It would be a lot more sensible to make regular monthly payments into an investment using the money that you would otherwise have been using to pay off the loan. Then you can miss a payment if you are short of money or just stop paying in completely and you will still have something to show for it. The interest that you repay on the loan could also be a lot more than you get back from the investment. Loans can be costly and this will depend on the type of loan and how much they cost, but it can often be the case. With an investment being a risk and a loan being a risk you will be taking on a lot if you decide to make this sort of investment. It could be wise to avoid all of this risk and come up with an alternative plan.