If you’re a homeowner with a mortgage, paying off your mortgage early may be an excellent way to dodge interest over the years, saving you thousands over the length of your mortgage.
However, before you begin prepaying, talk to your lender to see if there’s a prepayment penalty on your loan, as well as a financial advisor to see if your additional payments could accrue more in an investment fund.
If prepaying your mortgage seems like a smart move, take these steps to get started.
Bump up your monthly payment.
An extra few hundred dollars a month can seriously decrease your overall interest over the length of your loan. Or, if you get a pay raise, include that extra income percentage into your monthly payment.
Make one lump “extra” payment.
Instead of adding a few hundred extra to each monthly payment, make one large lump payment annually. Funnel your tax return into your mortgage, that work bonus, or any additional cash you may have at the end of the year.
Talk to your lender to see if refinancing is smart. If you can refinance to a shorter term mortgage with a lower interest rate, you’ll save thousands in the long run. However, a shorter term mortgage means higher monthly payments, so be sure you can swing it, and calculate all associated refinance costs to make sure you’ll actually save money overall.
If you're looking for more help managing your mortgage, contact us and we'll point you to someone who can help.