A great way to save thousands of dollars and shed years off your mortgage while building equity is to prepay your mortgage.
When prepaying your mortgage you should usually write on your check and your
coupon or statement that the money above and beyond your normal payment is to be
applied directly towards the principal of your mortgage loan and not
towards future payments. Many mortgage companies, if this is not written, will
simply apply this extra payment money towards future payments and not towards
your principal of your loan balance. Therefore, if you want to prepay your
mortgage, which prepaying your mortgage is a good idea, you will want to make
sure you note that prepaying your mortgage is your intention to the mortgage
You can make payments directly towards your principle at any time. This will ultimately reduce the amount of interest you pay over the life of your loan.
Every cent spent over your minimum payment comes off of the principal balance of your loan.
Making one single additional mortgage payment per year will achieve the same result as making bi-weekly payments. Either action will shorten your 30 Year Fixed Rate Mortgage by approximately 7 years .
Pre-payments are great — but your individual situation has to be considered. If housing values are dropping (in real, inflation adjusted terms) in your area, pre-payments might save you interest expense, but the equity that you are supposedly building is just disappearing. You might want to consider letting the bank assume the risk, and keep your money somewhere that will keep it earning above the rate of inflation.
Many people apply any federal and state income tax they receive towards paying down their mortgage. By applying your tax returns and making one extra payment a year you can drastically reduce the length of your home mortgage.
If you have any questions regarding our products, you can contact us by calling or e-mailing us and we'll get back to you as soon as possible. Thanks!
Information listed above is to be used for educational purposes only and is not guaranteed