WHAT HAPPENS IF YOU PAY EXTRA ON YOUR MORTGAGE?
What happens if you pay extra on your mortgage? According to the FDIC, 97.3% of people don’t systematically pay extra on their mortgages, and sadly, they are missing out on a tremendous savings opportunity.
If you are a 30-year mortgage holder, what does this mean for you? Without paying extra on your mortgage, you will not be able to finish your payments sooner than the previously determined 30-year contract, and the mortgage bank will profit from your lack of advanced payment. Each year you make mortgage payments, there are additional interest payments that also have to be made, but if you pay extra on your mortgage and satisfy your commitment early, you are not paying the interest payments for the years shaved off the mortgage.
Why do the promises to pay extra actually fall through? The reasons are many, but put simply, life can get in the way, and regardless of whether you have the money or not, things will always come up: prom dresses, new clothing, sports equipment and other things you could never predict. They key is to make a plan to pay extra each month and doggedly stick to it — even if it’s a small amount. A shorter mortgage (although it would involve slightly higher monthly payments), is cheaper in the long run — and that means bigger savings for you.
People generally opt for longer mortgage contracts in order to have more spending money, but if you have the money available to pay extra on your mortgage, then make a commitment to do it — it could save you thousands.
If you’d like to discuss the benefits of paying extra on your mortgage, contact an experienced, licensed mortgage banker who can help you achieve significant savings.