When you sell your home, you may choose to pay off your mortgage entirely. Paying off your mortgage early can be a good choice if:
You have a "fully open" mortgage with no prepayment charges
Your remaining balance is small (Depending on your specific mortgage, however, you may have to pay a prepayment charge to discharge it early)
You're not planning to buy again
Current mortgage rates offer you little or no financial advantages
Paying off your mortgage early may NOT be a good choice if you have a "limited open" or "closed" mortgage in which only a part of the balance can be prepaid each year-usually 10%. On amounts above the 10% there may be a pre-payment charge levied. Usually, it amounts to either three months interest on your outstanding mortgage balance, or the Interest Rate Differential (IRD), whichever is higher. The IRD is the difference in the interest payable on your existing mortgage versus that payable on a replacement mortgage, calculated on the time remaining in your existing mortgage term.
Talk to your banker. He or she can help you weigh the pros and cons of these choices, and possibly offer other attractive alternatives, including a portable mortgage.
