Many people want to pay off their mortgage loan off quickly; it seems to make sense if you desire a debt free lifestyle. Though it may seem a good solution to pay off the loans, you shouldn’t rush to it before finding out more on this issue.
It doesn’t take much math to convince you that paying down your mortgage can easily save you thousands of dollars in terms of the total interest that you will incur over the entire loan period. This is possible since by paying off, you are reducing the time in which you are owed. Another advantage is the assurance of owning a home in a few years vs. possibly never, and mortgage loans would be a thing of the past.
Below are some six questions Gay Realtor recommends that you need to ask yourself before making extra mortgage payments.
1. Are there any expensive debts you need to pay off? If your answer to this question is YES! Then you need to reconsider paying off the higher interest debts first. Some of the debts are way more expensive than the mortgage itself, and the interest is not deductible ~ therefore you need to clear them first.
2. Is refinancing a better option? You may be lucky enough to be getting some extra cash (a lump sum) that you could apply to a new shorter term mortgage, then it would be more logical to refinance the mortgage than just paying off the existing loan before it’s due. In this case the shorter mortgage term (5yr., 10 yr., etc.) will help you significantly in getting a nice refinance rate, and become debt free.
3. Any extra fees involved? Irrespective of the fact that there could be some prepayment fees that are incurred when you pay part or the entire balance before time, there could be some other fees depending on the type of mortgage and the period which you got it. Find out what the amount of interest you will save is if you are to pay off early and if there are any pre-payment penalties.
4. Will you be forced to use your equity within a few years? Remember the old piggy bank? During the housing boom many home owners handled their home equity in a similar way as the piggy bank; they would use the equity in their home to get the cash at any time. Home equity loans are available if you need the cash at a later date, though it does come with its own cost.
5. Do you have some extra funds? Problems are likely to come up in life, hence the need to have some extra money to get through these issues. Mortgage companies are not going to treat you uniquely and say because you have made advanced payments then a delay would be understandable, no. It doesn’t work this way and this is the reason why you need to have extra money saved for a rainy day / financial crisis.
6. Is your future income secure? Are you certain about your stream of income? What if you are not paid on time or you lose your Job? No one can predict the future, putting up home equity can help, but without a job, are you able to tap into that equity? Now that you know the essentials to follow and feel that you are on the right track, then making your mortgage payments could be a good step.
Author Jeff Hammerberg is the Founding CEO of GayRealEstate.com, offering Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast. FREE Buyers Representation ~ Free Relocation Kit to any City, USA ~ Free Sellers Market Analysis for home sellers.