The only problem with this is you can't check if your fingers are touching adjacent strings, but it's ok.

I assume you're playing on an acoustic. You can make it quieter by threading a shoelace or strip of material through the strings close to the bridge.

Solid body electric guitars are better for "silent" practice. You can either play it without plugging it into an amp, or use an amp or similar that has a headphone socket (or similar setup), but I wouldn't recommend the expense of buying an electric setup unless that's what you plan to play.