“You get to save thousands of dollars and shave years off the life of your loan because the additional payments made toward your monthly principal basically constitutes a partial prepayment of your mortgage,” says Jen Cowen, REALTOR at CENTURY 21 Award.However, there can be some drawbacks; each mortgage has specific terms describing how and when prepayment may occur. Some lenders impose a penalty if you repay the loan too soon.
The total savings potential also will 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.
“If you're putting additional payments into your mortgage, make sure you're also building up your retirement fund. While your home is your greatest investment, you don't want to end up house rich and cash poor in the end,” advises Cowen.
Another note from Cowen; If you plan to speed up your mortgage payments, do it on your own instead of enlisting the help from a bank, who may charge a fee.
For more information on real estate, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.
