Prepay Your Mortgage to Build Wealth
This is a guest post by Millionaire Mob, a blog focused on investing in dividend growth stocks and travel hacking. We have helped thousands of people with bettering their financial future through passive income and dividend investing.
One of my favorite wealth creation tips is prepaying your mortgage to build significant wealth. I’ll highlight why you too should consider accelerating your mortgage payments to achieve wealth and ultimately live completely financially free.
Why should you consider prepaying your mortgage
There are plenty of considerations on why you should prepay your mortgage. All of these considerations are true benefits and will immediately result in increased wealth to you in the future.
Here are the benefits of prepaying your mortgage:
- Guaranteed, Risk-Free Return
By prepaying your mortgage, you are locking in a guaranteed rate of return that is equal to the interest rate on your loan. This is the only completely risk-free return that you can get on your money. By prepaying your mortgage, your payment goes directly to reducing your principal balance owed on your mortgage. This is dollar for dollar equity into your asset ownership.
This is simply a method of every dollar that you put in goes to less interest you will pay over time. This can end up saving you thousands of dollars.
- Lower Principal Equals Faster Amortization
With every prepayment that you make on your mortgage, you increase the amount of principal going to your future payments on your mortgage for every single payment. This is an outstanding way to reap the benefits of your prepayment with every passing day. By having a routine cadence of prepayment, you will accelerate the speed in which your mortgage balance hits $0.
- Immediate Value Creation for a Real Asset
Finally, by prepaying the mortgage, you are creating value in a true asset. Real estate is a stable asset that can increase in value over time. If you prepay your mortgage, you reduce all risk associated with owning your piece of real estate. If you have no mortgage, you are isolated from fluctuations in housing prices.
Conclusion on Prepaying Your Mortgage to Build Wealth
I’m setting up a goal of trying to live mortgage free. I’m doing so by creating multiple sources of income that will go directly to reducing my mortgage balance with each passing day. If you need methods on how to prepay your mortgage, try renting out unused rooms and use any additional income generated to reduce your mortgage balance. In addition, you can reduce your principal balance faster by switching to biweekly payments as opposed to monthly payments.
If you haven’t bought a house yet, consider purchasing a cheaper (or smaller) home. This will help immensely as you try to repay your mortgage completely. Trust me. Your future self will certainly thank you.
Prepaying your mortgage gives you endless flexibility for your future financial planning. Once you hit a $0 balance on your mortgage, you obtain unlimited to retire. Housing payments are individuals biggest expense items. By eliminating your mortgage payment, you can even quit your day job and start a side job to live financially free.
What are you going to try to do to live mortgage free? Have you prepaid you mortgage to build wealth? Please let us know in the comments below. I’d love to hear from you.
Author Bio: Millionaire Mob is where people come together to find the best travel deals and financial advice. We specialize in dividend growth investing, passive income and travel hacking. Our advice has helped thousands of people travel the world and achieve financial freedom. Follow me on Instagram, Twitter and/or Facebook for all the latest updates.