Is the Mortgage Monkey on Your Back? Here’s How to Get It Off
Many homeowners can’t wait for the day when the mortgage monkey will no longer be on their back. If this is true for your situation, what can you do?
For one, you can make some extra payments on your loan. Most loans in today’s market don’t carry a prepayment penalty, which means they won’t penalize you for paying extra. Be sure to instruct your lender to allocate that money toward the principal, though, and not the interest on your loan.
There are several ways to do this; you can request a bi-weekly payment schedule with your lender. In this way, you’ll be making one extra full payment per year—thirteen as opposed to twelve. You’ll get a little ahead on your mortgage, and the interest will drop accordingly.
If your lender is unwilling or unable to grant that request, no problem—you can pay extra toward your principal each month. Locate your copy of the amortization schedule you should have received when you purchased your home. Using this, you can determine how much of your payment is going to interest and how much is going to principal. If $950 of your $1,000 payment is going to interest while the other $50 will go toward the principal, you can make that full payment and then write a bonus check of $50 on top of that. You can follow this month to month and chip away little by little at your principal.
If you’ve recently received a year-end bonus at work or you’ve come into some inheritance, you can make a lump sum payment as well. And, again, always be sure your lender knows that the money is to go toward the principal.
If you’d like more information on what we’ve covered today, please send me an email at Charlotte@CharlotteMabryTeam.com. I’d be glad to answer any questions you have!