Everyone who has a mortgage has their own way of counting down the months or even years until they finally pay off all they owe and own their home clear and free. But what if you can prepay your loan? Would you do it?
What is Mortgage Prepayment?
Majority of borrowers are intent on getting rid of their home loan that they pay additional money on top of their monthly mortgage payments. This is called mortgage prepayment, and it may aid in building home equity faster, save you thousands of dollars on interests, and may free you from mortgage debts sooner.
Should You Prepay Your Mortgage?
Prepaying your mortgage will take more than your good intentions. Time and discipline are both equally necessary. Some borrowers forego prepaying since the whole process takes too long for them. Some are not disciplined enough to save extra money each month that will go towards prepaying.
On the other hand, those who choose to prepay see the process as something that will help them settle their mortgage sooner so they do not have to worry about paying it off in the next several years. What it comes down to is figuring out what’s important — saving for today or saving for the future? However, there is no doubt that the biggest factor when deciding to prepay your mortgage is your personal financial goals and situation.
For this, you must evaluate your whole financial picture. Do you have life or health insurance coverage? Are you planning to fund your retirement plan if you have one? If there is something that you failed to cover, maybe you’ll be better off focusing on that first instead of making additional payments to your monthly mortgage dues. Once you have covered all the basics, you should then begin calculating the numbers and figuring out if you can afford to make prepayments.
It is important to note, however, that not all lenders will agree to prepayments. In some cases, you will likely encounter penalty fees for paying off your loan earlier than stated in your loan agreement, so check with your lender first so you know what your options are.