There are many arguments, both for and against prepaying your home mortgage. As mortgage interest rates continue to drop, a lot of homeowners are curious as to whether or not this is a good idea for them. Some of them feel it could be best for them to just refinance. Others think that making extra mortgage payments in order to pay off their loan sooner is the best thing for them to do.
Often, a mortgage prepayment can be looked upon as a way to invest. This investing of extra money is done for a much smaller interest rate. In most cases, that sum is a huge investment.
Before considering whether or not a mortgage prepayment is for you, check to see if your mortgage came with a prepayment penalty clause. This is a statement in the loan documents saying that if you pay off a great deal of the loan before a set time, there will be a penalty. Most of the time, loans which include this type of clause have a lower interest rate to make up for this.
A prepayment could still possibly be a good idea, even if you do have this clause. Up to twenty percent of the loan is still payable each year without penalty in most cases. A homeowner needs only to add the sums and see if it will cost him more in the long run.
The argument for prepayment has many valid points. Having your home paid off can be a great load off your back. Some people feel it could be best for them to just refinance. It brings the dream of having no debt even closer to reality. This is also a beneficial plan to those who fear they may lose their jobs.
With the stock market, there is no guarantees like there is with prepaying a mortgage. It is also a great plan for those who wish to retire early. They can simply start putting the same amount as the mortgage into a savings account for when they retire.
Often, a mortgage prepayment can be looked upon as a way to invest. This investing of extra money is done for a much smaller interest rate. In most cases, that sum is a huge investment.
Before considering whether or not a mortgage prepayment is for you, check to see if your mortgage came with a prepayment penalty clause. This is a statement in the loan documents saying that if you pay off a great deal of the loan before a set time, there will be a penalty. Most of the time, loans which include this type of clause have a lower interest rate to make up for this.
A prepayment could still possibly be a good idea, even if you do have this clause. Up to twenty percent of the loan is still payable each year without penalty in most cases. A homeowner needs only to add the sums and see if it will cost him more in the long run.
The argument for prepayment has many valid points. Having your home paid off can be a great load off your back. Some people feel it could be best for them to just refinance. It brings the dream of having no debt even closer to reality. This is also a beneficial plan to those who fear they may lose their jobs.
With the stock market, there is no guarantees like there is with prepaying a mortgage. It is also a great plan for those who wish to retire early. They can simply start putting the same amount as the mortgage into a savings account for when they retire.
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