Have you ever thought about pre-paying your mortgage? It could be a good option for you if you’re looking to shorten your loan term. Let’s look at some perks to pre-paying your mortgage.
Pre-paying your mortgage and why it could be helpful.
Pre-paying your mortgage simply means that you make additional mortgage payments to reduce your interest costs over the course of your loan and to shorten the amount of time it takes to pay off your mortgage.
Talk to your loan servicer to make sure there are no pre-payment penalties.
For instance, let’s say you have a 30-year, fixed-rate mortgage with an interest rate of 4%. Your present loan balance is $300,000 and you have 20 years remaining in your loan term.
If you were to put an additional $100 toward your mortgage every month, you could take one year and six months off of your loan term, and save more than $11,000 in interest.
Or, given the same scenario, if you were to put an extra $1,500 toward your mortgage just once every year, you could reduce your loan term by one year and 10 months, and save more than $14,000 in interest!
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