Proactively Managing Your Existing Mortgage

Proactively Managing Your Existing Mortgage



Proactively Managing Your Existing Mortgage
A red brick house and a​ white picket fence - long the​ American dream of​ many and in​ recent years more Americans have been buying their own dream in​ the​ form of​ their own home .​
Yet,​ for millions of​ us we don't have a​ real good understanding of​ how our mortgage works completely and as​ a​ result don't proactively manage it .​
There are numerous ways you​ can cut tens of​ thousands of​ your mortgage by taking a​ few simple steps during the​ life of​ your loan.
Have you​ ever sat down and thought about how much you​ could save off your mortgage if​ you​ paid a​ little extra every month? It doesn't have to​ be much,​ maybe an​ extra $50 here,​ or​ an​ extra $100 there .​
in​ the​ early years of​ a​ mortgage most of​ your payment is​ going to​ pay off the​ interest on​ the​ loan .​
Every extra dollar you​ can put towards the​ principal will have a​ ripple effect through the​ entire life of​ the​ loan by reducing the​ total amount of​ interest you​ pay .​

But wait,​ it​ gets even better! Suppose you​ find that you​ can send in​ a​ whole extra payment - you​ are basically now turning your fixed payment,​ say $600,​ into an​ investment tool .​
That extra payment is​ going to​ go against your loan principle and you​ are in​ effect earning whatever interest rate you​ are paying on​ your mortgage over the​ life of​ the​ mortgage in​ reduced interest charges .​
So if​ you​ are paying 6.75% and make an​ additional $600 payment you​ are in​ effect lowering the​ total amount you​ will pay on​ your loan by the​ compounded amount of​ that payment .​
If you​ have 30 years to​ go in​ paying off your mortgage,​ that extra payment will slash a​ total of​ $3,​968 off your mortgage! Not a​ bad investment at​ all!
However,​ as​ good as​ this sounds - beware of​ one pitfall: pre-payment penalties .​
Some mortgage companies specifically charge you​ for paying ahead of​ time .​
Why? Because they aren't making as​ much money off you​ as​ they had anticipated .​
When shopping for a​ mortgage always make sure that they do not try and penalize you​ for being a​ smart consumer and paying your loan off early!
Another way to​ help shave off the​ amount of​ interest you​ pay over time is​ to​ consider splitting your monthly mortgage payment up into biweekly payments .​
This amounts to​ making an​ extra payment each year since there are 26 biweekly periods in​ a​ year .​
Again,​ make sure you​ won't get penalized for prepaying!
Refinancing is​ another great tool to​ use during periods where the​ savings will outweigh the​ costs associated with it .​
This is​ an​ important point because lower interest rates alone do not always mean you​ will get a​ better deal .​
Many times you​ have to​ pay fees and closing costs on​ the​ mortgage itself which can quickly eat up any savings you​ realize with lowering your interest - this is​ especially true if​ you​ have some years under your belt repaying your mortgage already .​

Do the​ math before you​ make the​ jump to​ see if​ it​ makes financial sense for you​ to​ refinance at​ current rates.
It is​ easy to​ take a​ proactive approach in​ making sure that your mortgage becomes a​ tool to​ owning the​ home of​ your dreams instead of​ a​ burden .​
Making a​ few smart financial choices can go a​ long way to​ helping you​ pay your mortgage down quicker than you​ ever imagined.




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