How Extra Mortgage Payments Benefit You

So you’ve finally made it: You’ve come to a top mortgage company like Mortgage Investors Group, and you’ve found a perfect home loan for you and your family. Beyond that, you’ve found the perfect new home and have gotten everything moved in.

Now it’s time for a new stage: Paying down your mortgage. Folks are always looking for tricks to help pay this big debt down faster and in smart ways – one area we regularly recommend is making an extra yearly mortgage payment. Let’s look at how this can help your finances, plus some common formats for doing so.

Benefits

There are several potential benefits to making just a single extra mortgage payment to your mortgage lender each month. These include:

  • Saving interest: By paying more toward your payments, you’re taking larger chunks out of the principal balance of your loan. This in turn lowers the amount of interest that gets added each month. Over time, this could mean a huge difference in the total you pay over the life of the loan.
  • Building equity: As you pay down your mortgage and “own” more and more of your house, you build equity. This increases your investment value, and means you may be able to profit if you sell. Equity also allows for future home improvement loans, and can help you get rid of private mortgage insurance if you reach a certain threshold in some cases.
  • Paying off early: You might end up paying off your home three or four years early by making a single extra monthly payment. You can then use those dollars for other important expenses.
Formats

There are a few options at your disposal when it comes to making extra mortgage payments:

  • Single lump sum: This is the simplest format – you save up money through the year, and send it in at any point. Be sure to specify that this is a principal-only payment, not for interest.
  • Monthly: Divide your monthly payment by 12, and then add that amount to each payment. The extra each month will be applied to principal.
  • Bi-weekly: Divide your monthly payment in half, and pay that amount every other week. By the end of the year, you’ll have sent in an extra month of payment.

For more on making extra mortgage payments, or to learn about any of our other services, speak to the pros at Mortgage Investors Group today.