If you pay several lump sum payments, you could pay off your loan years earlier. Even one or two additional mortgage payments a year can help you reduce your mortgage debt much more. Not only does this mean you'll get rid of your mortgage faster, it also means you'll get rid of your mortgage more cheaply. A shorter loan = lower payments = lower interest rates.
Just one additional payment per year can have a significant impact on the length of your loan, perhaps even reducing the term by years. This means you won't have to pay your mortgage much sooner than expected. Imagine everything you could do with those extra dollars once you stop paying your mortgage, whether it's paying college tuition, taking a dream vacation, or buying a second home. Making additional mortgage payments can be a smart financial decision if you want to reduce the amount of interest you pay and shorten the length of your mortgage. For example, if you were lucky enough to apply for a mortgage when rates were at historic lows (they fell between 2 and 3% before rising again), making additional mortgage payments may not be the best use of your money.
Yes, using a mortgage calculator can help you determine how additional payments will affect the duration of your mortgage and the amount of interest you'll pay. In most cases, if you want to prepay your mortgage payment for a future month, perhaps because you're going on vacation, you'll need to contact your mortgage lender. In addition, since you are likely to pay private mortgage insurance (PMI) if you have less than 20% of the equity in your home, making additional mortgage payments can help you reach that threshold sooner, so you can eliminate the PMI depending on the financing or loan program that request. As a general rule, making one additional mortgage payment per year at the start of the 30-year mortgage can shorten the term by about four to five years.
If you're ready to start making additional mortgage payments or are about to apply for a mortgage loan and want to learn more about potential savings, contact a Movement Mortgage loan agent in your area for help...