These missteps could be costly if you’re paying off your mortgage early.
Paying off your mortgage ahead of schedule is a great way to save money on interest and to achieve home-ownership status more quickly. However, if you are pursuing this financial strategy, it’s vital that you do not make costly mistakes. Here are some of the missteps you need to watch out for.
- Mistake 1: Failing to Specify Extra Payments Toward the Principal
Paying extra money every month will not necessarily help you pay off your mortgage more quickly. If you do not specify where you want the money to go, your lender might simply apply it to your next scheduled payment. This is why you need to stipulate that additional payments go towards your principal balance. Inform your lender of your intentions so they can make a note and allocate the money correctly.
- Mistake 2: Failing to Ask if There is a Prepayment Penalty
It’s important to remember that lenders make money off the interest they are charging you. This is why they might want to stop you from paying off your mortgage early. Some lenders will implement a prepayment penalty to make up for the interest they are losing. In some cases, the penalties are so steep that paying off your mortgage early will actually cost you more money. So, make sure you understand your lender’s prepayment policies before you decide to start paying off your mortgage at an accelerated rate.
- Mistake 3: Spending Too Much Money
Using every spare dime to pay off your mortgage is not always a great idea. This is especially true if you don’t have anything saved for emergency situations. Rather than making such an aggressive effort to pay off your mortgage, try to do it at a reasonable pace that allows space in your budget for unexpected emergencies and expenses.
These are some of the costly mistakes that you should avoid when paying off your home mortgage early. Are you looking to buy or sell in the Hermosa Beach area? If so, contact the experts at Brighton Escrow to get the top-tier escrow service you deserve. Serving the Hermosa Beach area, we are ready to make home buying and selling a breeze.