It’s hard to believe that making just one extra mortgage payment every year can make a huge difference in the length of time it will take you to pay your mortgage in full. For example, if you have a 30-year fixed rate mortgage, making one extra full payment each year can reduce the overall term of the mortgage by up to six years! In other words, your 30 year mortgage can be reduced to a 24 year mortgage by simply making one extra full mortgage payment each year. If this is something you think you can afford, it’s an excellent opportunity to get your mortgage paid in full much faster. Additionally, an extra payment each year will reduce the overall amount of interest you will have to pay – which can save you thousands of dollars.
Are You Obligated to Make an Extra Mortgage Payment Every Single Year?
If you decide that you want to make an extra mortgage payment each year because this is a method you want to use to get your mortgage paid in full faster (and you also want to save money on interest), you are under no obligation to stick with your plan. In other words, if something comes up and you can’t make an extra payment one or more years, you are under no obligation to scrape together the funds to make the extra payment. Your mortgage lender will not hold you to it.
Benefits of Making an Extra Mortgage Payment Each Year
The obvious benefits of making an extra mortgage payment each year are 1) your mortgage will be paid in full much faster than it would if you made regular payments for 30 years, and 2) you can potentially save thousands of dollars on the total amount of interest you would be required to pay over the course of 30 years.
However, there are also many residual benefits of having your mortgage paid in full as quickly as possible – including the following:
• You will own your house outright
• You will be one step closer to being debt-free
• You will be able to allocate your income to something other than monthly mortgage payments
• You will have more money each month to spend or save
A Few Things to Consider When Making Extra Mortgage Payments
For homeowners that can afford to make an extra mortgage payment each year, the benefits can be truly beneficial. However, it’s important to keep in mind that if you make an extra mortgage payment, it’s not easy to get that money back if you need it in an emergency. Oftentimes, in order to retrieve extra money that you’ve sent to your mortgage lender, you would either have to sell your house or refinance your loan. So, make sure to take this into consideration before making extra mortgage payments.
For more information about the benefits of making an extra mortgage payment each year, give The Home Loan Arranger a call today at 1-877-938-7501 for a free consultation!