Purpose

• The purpose of a mortgage is to allow you to purchase a home that you otherwise would not be able to pay cash for. Mortgages allow you to effectively leverage your future earnings. In a sense, you are living beyond your means.
  
  

Significance

• If you pay off your mortgage prior to the end of the term of the mortgage, you can put your former mortgage payment toward your savings. This increases your savings amount and allows you to invest more money than you otherwise would be able to had you kept your mortgage.
  
  

Benefits

• The benefit of paying off your mortgage early is that you receive additional income that you didn't have before. You may retire early without having to worry about paying down a mortgage debt. Additionally, if you ever need additional income that your retirement savings does not cover, you can take out a reverse mortgage in your old age, since your mortgage is paid for.
  
  A reverse mortgage allows you to use the equity in your home as a savings. You take payments or withdraw money from the equity in your home.
  
  An additional benefit of paying off your mortgage early in order to retire early is that you avoid paying interest on the mortgage. The amount of money you'll save depends entirely on the term of the loan, the interest rate being charged and how quickly you pay off the mortgage.
  
  

Disadvantages

• The disadvantage to paying off your home early so you can retire early is you must decrease your current savings amount now. This, in turn, means the money you would have saved and invested won't be invested. By not investing that money money now, you forgo any possible interest on the money.
  
  Ironically, this may actually prevent you from retiring early if you don't have enough time to save and invest (after your mortgage is paid off but before your scheduled retirement begins).
  
  

Considerations

• Before you pay off your mortgage early, analyze your personal situation. Use a retirement calculator or speak with a financial planner to determine how much money you may earn by keeping your mortgage versus paying it off early. You'll need to know whether compound interest earnings coupled with keeping your mortgage will overwhelm the rate at which you're able to save by waiting to invest more money after you've paid off your mortgage.