How to Wisely Pay Down Your Mortgage
Should you pay off your mortgage early? Does it make sense to pay down your mortgage? While the answer to these questions is actually more of a personal preference, we can tell you that when it comes paying off your mortgage early, there is one simple rule that can save you thousands: faster is better.
How do I know if I should pay off my mortgage early?
Like we mentioned before, it all comes down to your personal preference. However, if you’re really stuck on whether or not you should pay off your mortgage early, consider these questions:
- Does your employer match any retirement funds you save?
- Do you have any debt other than your mortgage?
- Do you have at least 24 months of living expenses in liquid assets?
- Do you currently owe more on your mortgage than your home is worth?
- Does the amount of your mortgage upset you?
I’ve decided to pay down my mortgage. Now what?
So you’ve weighed the pros and cons of paying off your mortgage early and have decided to go for it! Now you must choose which payment strategy is right for you. The most common options for paying down your mortgage include:
- Bi-weekly mortgage payments
- Making extra principal payments
Bi-weekly mortgage payments are usually offered through your lender. Bi-weekly payments are popular because the majority of people get paid every two weeks and bi-weekly mortgage payments coordinates with their payday schedule.
When making extra principal payments, make sure you remember the key rule: faster is better. “Faster is better” when making extra principal payments because the monthly interest expense on a mortgage is calculated on the loan balance, so the sooner you can get a lower loan balance, the lower your monthly interest expenses will be!