Maybe you got a big pay bump at work, or a family member has gifted you a large chunk of change. Whatever the reason, you’re suddenly able to pre-pay your mortgage—this means paying it off before your allotted time is up (say, 30 years).
Pre-Paying Can Save You Thousands of Dollars
Pre-payment also works gradually, say if you make two payments a month instead of one, or a larger monthly payment than required. Over time, these additional payments add up and you pay down your debt faster.
Of course, the total savings potential will also depend on how long you plan to live in your home. If you expect to move in the near future, do not expect to reap savings as large as those gained by people who pay ahead of schedule until they own their home free and clear.
But Check Your Loan Terms for Penalties
However, take note: Each mortgage has specific terms describing how and when pre-payment may occur. Some lenders impose a penalty if you repay the loan too soon—however, these penalties are often less than you would pay in interest if you let the loan run full term, so do your research.
Talk with a Professional First
As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.