Once you have a reasonable amount of "emergency funds," I would recommend putting the extra $150 per month toward any unsecured outstanding debt such as credit cards, student loans, car payoffs, etc. If you don't have any of that, then put the extra money towards the mortgage. Pay off the smallest balance debts with the highest interest rates first, then move on to the next debt. Unless your savings account is paying you more than the interest rates on your debt(s), it doesn't make sense to "save it" in the bank. Keep your money moving, and working for you at all times.
In other words, there are a lot of factors involved in this decision and you will do well to follow Ben's advice and talk to an expert.
Prudential Real Estate of the Rockies
We are all proud of your for making the big step of purchasing a home even with the considerable problems and challenges involved. Also for not being shy about asking the questions needed to make the intelligent decisions to move forward with your life. Good answers below. Just wanted to add that if you do make extra principle payments, be sure to write a separate check that says 'this is for principle only'. Otherwise they will automatically apply it to interest which will defeat your purpose. Best of success and Happy New Year!!
Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
Making an extra payment or more every year is a great idea but make sure you make it clear it is to the "Principal Only". Making additional mortgage payments every month is also a great idea; again make sure your additional payment is paid to the principal only. By making these extra payment you can cut years off your mortgage and save thousands of dollars.
When making major financial decisions you should always use due diligence, check with your financial planner, mortgage company etc to be sure it is right for you.
Good Luck and Good Choice
Jim Lux CRS, GRI, e-PRO
As to your questions, making one extra mortgage payment per year will reduce your 30-year loan to roughly about 19 years. And, of course, the savings in interest are going to be considerable.
But, it all comes down to your individual financial situation and goals.
Best of luck to you.
National Investor Realty
Congratulations on buying your first home and for asking a great question. I canâ€™t give you a blanket answer however. It will really come down to the rest of your financial situation. Your mortgage payment should be affordable, but not too comfortable. The first home is the one you should have to stretch a little to reach. Between your mortgage interest write off (which we hope is continued) and future raises, your payment will be more affordable over time.
If you are in other debt, car, credit cards, student loans, you may want to focus on paying them off first. The rates are generally higher and the value that those goods are on depreciates. If you donâ€™t already have a safety net in the way of a savings account, I would go there next. Having several months of income in savings can help you keep your house if one of you loses a job or becomes ill and misses work for a while.
If you are otherwise debt free and have a great savings (emergency) account, then paying down your mortgage would be good. I think most people will find paying a little extra every month will have the greatest net affect. Every dollar over the minimum payment on a simple interest loan goes against the principle. As your principle decreases, the total interest you will be paying will decrease as well.
I hope this was helpful, congratulations again and best wishes for a great new year.
By paying $150 to $200 more per month, you can shave years off your mortgage.
Keep in mind, paying a little extra over a long period of time will yield MAJOR benefits.
Much Happiness to You!!!!
Kawain Payne, Realtor