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What are the Advantages of Prepaying Your Mortgage?

The federal tax refund was a big benefit to a lot of families who used it to pay off debt, buy much needed but unaffordable items, or just put it away for a rainy day. Simply use these funds to pay down a part of your home loan with your next monthly payment.

Using extra money you have will pay your home loan down faster.

Some people may have decided to use this money to help their financial future, and instead of investing in stocks and bonds, it may be better to prepay some of your home loan. Right now, the stock market is a bit scary for most people to start to invest in, but your home may prove to be the best investment of your life.

Using this rebate or even any extra funds you come into to pay down the mortgage will shave small amounts that over time add up to pay off your mortgage faster.

Even if you don't have a bonus or refund, or have spent it, there are other ways to reduce your home loan rapidly. This can be done without affecting your everyday expenses to a great extent.

One way is to add a small amount to each mortgage payment; giving up a small luxury, such as a lunch out or your making your coffee at home can free up the funds to make a higher payment. Since interest piles up on interest in a mortgage, paying extra quickly reduces the total owed. Not only will you lower the overall interest charges, but you will pay off the principal earlier as well if you stuck to this program.

There is another good way to pay your home loan faster is to pay it more often. The secret is to make an extra payment on your mortgage each month, by dividing your payments in two, paying one at the beginning of the month and the other at the end of the month. The payments are the same each month, but the earlier payment will lower your mortgage faster over time.

By: Scott Staudt

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