Is It a Good Idea to Prepay Your Mortgage?

The federal tax refund was a big boon to a lot of families who used it to pay off debt, buy much needed but unaffordable items, or just put it away for a rainy day. Simply use this money to pay down a portion of your home loan with your next monthly payment.

Prepaying your mortgage may save you a lot of money in interest, and can even cut down on the term of your loan.

Some people may have wanted to use this money to help their financial future, and instead of investing in stocks and bonds, it may pay off better to prepay some of your mortgage. Especially since there is not a lot of confidence in the stock market these days, this is even more reason to put your money in something you get a lot of value from anyway, your own residence.

Using any large amount you receive, or even small amounts every month, will cut down your loan balance and save you a lot over the long run.

Even if you don\’t have a bonus or rebate, or have spent it, there are other ways to reduce your mortgage quickly. There a couple of sure fire ways of achieving this end, without even having a big effect on your normal budget.

Just do without some small luxury, such as your gourmet coffee each morning, and devote the money saved to an additional payment on the loan. Since interest piles up on interest in a mortgage, doing this reduces the total owed. This will bring the maturity date of the mortgage down more quickly.

Another proven method of reducing overall interest is to pay your mortgage more frequently. Just mail one half of your mortgage payment in earlier than its due date, and the second half on the normal due date. The payments are the same every month, but the earlier payment will reduce your mortgage faster over the years.

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