{"id":1071,"date":"2019-08-18T01:59:51","date_gmt":"2019-08-18T01:59:51","guid":{"rendered":"http:\/\/www.mikeclover.com\/blog\/?p=1071"},"modified":"2019-08-18T01:59:51","modified_gmt":"2019-08-18T01:59:51","slug":"is-it-wise-to-pay-extra-on-your-home-mortgage","status":"publish","type":"post","link":"https:\/\/www.mikeclover.com\/blog\/2019\/08\/18\/is-it-wise-to-pay-extra-on-your-home-mortgage\/","title":{"rendered":"Is it wise to pay extra on your home mortgage?"},"content":{"rendered":"

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Whether or not you should pay down your mortgage depends upon your plans and the other circumstances in your life. Let\u2019s take a look at the pros and cons.<\/p>\n

First, the pros\u2026 <\/strong><\/p>\n

Your mortgage will be paid off sooner.<\/strong><\/p>\n

For many who plan to live in their homes indefinitely, paying it off sooner is a huge incentive to add dollars to each month\u2019s payment. When you stop to consider that in the early years of a mortgage loan the bulk of the money is going toward interest, an increase of just a few hundred can knock a full month off the end of your loan.<\/p>\n

Just to round things off, consider that you have a $1,200 per month payment and only $300 is going toward the principal. Paying $1,500 is akin to making two payments at once. If you do that for a year, you\u2019ll reduce your loan term by a year. Of course, as you pay down the loan, the ratio of principal to interest will change.<\/p>\n

You\u2019ll pay less interest over time. <\/strong><\/p>\n

Let\u2019s assume for a moment that you have a $250,000 fixed-rate mortgage with a 4% interest rate and 30 year amortization. Your monthly principal and interest payment will be $1,193.54. If you pay that amount for 30 years, you will have paid $179,673 in interest.<\/p>\n

Should you decide to pay $1,400 per month instead, you\u2019ll pay off the house in about 274 months, and pay a total of $133,600 in interest.<\/p>\n

The less you owe, the more equity you\u2019ll have.<\/strong><\/p>\n

This could be a benefit if you some day wish to take out a home equity loan for improvements, or if you wish to sell and use your equity as a down payment on a new home.<\/p>\n

The less you owe, the better your credit score.<\/strong><\/p>\n

This could be important at some time in the future, since high scores equal lower interest rates on everything from a car loan, to credit cards, to a mortgage on a vacation home.<\/p>\n

Now for the Cons\u2026<\/strong><\/p>\n

Paying less interest could mean paying more income tax. <\/strong><\/p>\n

Depending upon your financial situation, your mortgage interest could be helping to reduce your tax bill. Since tax regulations have changed, this is something to discuss with your tax accountant.<\/p>\n

Paying more on your mortgage might mean paying more interest on higher interest debts. <\/strong><\/p>\n

Look at your car loan, a student loan, or a credit card balance before deciding to pay down the mortgage. When you have extra funds to use, it\u2019s always wise to pay off the highest interest debt first.<\/p>\n

You might be wise to put more into savings. <\/strong><\/p>\n

First, everyone should have an emergency fund. Having 6 months or more worth of cash in a readily available account will give you peace of mind. Then, consider putting more into retirement funds, especially if your employer will match your contributions.<\/p>\n

Your mortgage loan could have a pre-payment penalty: Beware! <\/strong><\/p>\n

While this isn\u2019t as common as it once was, some lenders do add a pre-payment penalty clause to their mortgage agreements. This penalty could equal several months\u2019 interest or be a percentage of the balance due. Be sure to read your mortgage loan documents carefully before deciding to pay down your mortgage.<\/p>\n

Interest rates are still way down \u2013 so if you\u2019re ready for a refinance, get in touch.<\/strong><\/p>\n

And just so you know, here at Homewood Mortgage, the Mike Clover Group,<\/strong> we never add pre-payment penalties to our mortgage loan documents.<\/p>\n

Call us today at 800-223-7409<\/strong><\/p>\n

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  Whether or not you should pay down your mortgage depends upon your plans and the other circumstances in your life. Let\u2019s take a look at the pros and cons. First, the pros\u2026 Your mortgage will be paid off sooner. … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/1071"}],"collection":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/comments?post=1071"}],"version-history":[{"count":1,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/1071\/revisions"}],"predecessor-version":[{"id":1073,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/1071\/revisions\/1073"}],"wp:attachment":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/media?parent=1071"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/categories?post=1071"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/tags?post=1071"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}