Save More Money by Making Extra Mortgage Payments
If you stumbled upon extra cash or a lump sum, make extra mortgage payments to save more money. This cuts out a substantial amount in interest and chops down your debt. Of course, it is not mandatory – as long as you pay your mortgage repayments, you are not obliged to make any extras. However, there are major benefits, including a big reduction in interest and debt.
Usually, mortgage loans have relatively low-interest rates. The loan balance is massive though, which leads to a shocking amount of interest, particularly during the early years of a long-term loan. Cutting this down through extra mortgage payments will sure help.
In addition, you buy flexibility when you pay down debt. With your mortgage loan paid off, you can move on to reaching other financial goals in your life.
How to make extra mortgage payments
You have options on how to spend extra money to your lender. The more common ways are monthly payments and lump-sum payments.
With monthly payments, just add a little extra to each monthly payment. You can ask your lender to pull an additional amount electronically or you can send a check. Doing it this way makes it easier to allocate for the extra mortgage payments in your monthly budget.
Lump-sum payments are better, on the other hand, if you have significant savings in cash. You can easily make one additional mortgage payment per year, sending 13 payments instead of 12. A bonus or inheritance can be used productively for this purpose.
Talk to your lender to find out more ways to prepay, and more important, verify that extra payments will not cause any problems. Some may charge you prepayment penalties or other complications may arise so better to discuss the process of making extra mortgage payments first.