- Paying off your home mortgage right away or buying your house outright creates instant equity. You can leverage that equity for borrowing money to pay for improvements or simply let the instant equity increase your net worth. Based on a $100,000 home, your net worth could jump at least that much, and possibly more depending on the actual value of your home.
- In addition to savings you can immediately put in your pocket, you also save money on mortgage interest. For instance, if you purchase a home for $100,000 on a 30-year note at a 7.0 percent interest rate, your total payment totals $665 per month. Over the course of a 30-year loan, the interest you pay would be 138 percent of the original cost of your home. Based on this calculation, you would be responsible for paying $138,509 in interest alone.
- You can use the money you spend on mortgage payments for home improvements. Again, based on a calculation of $665 per month, you can put away that money each month towards a sizable home improvements every one or two years. Alternatively, you can spend a little each month on home improvement projects. Whether you wait until you've saved enough to cover substantial home improvements or you spend some money each month, it's likely you're increasing the value of your home above the $100,000 you already have in equity.
- The cost of insurance might be lower, depending on your location and your homeowner's insurance policy. You might be able to negotiate a lower annual insurance premium because you don't have a mortgage. Insurance companies look favorably on homeowners who no longer have a mortgage. Mortgage-free homeowners present a lower risk to insurance companies and lenders -- if your mortgage is higher than the insurance proceeds, you could still owe money on a house that's totally destroyed. Importantly, in the insurer's eyes a homeowner without a mortgage is less likely to engage in insurance fraud to help them out of a mortgage they cannot pay.