Save money on your mortgage
2007-04-20
If you’re interested in on how you could save money on your mortgage over the years and build equity faster, in the same time, then you should think about the mortgage prepayment option. Making use of the mortgage prepayment option will undoubtedly help you pay your loan off years ahead of the date specified in the contract. You could end up saving a large amount of money, close to tens of thousands of dollars, the more you’ll want to pay each month, the more you’ll save and the sooner you will pay off your loan. Use a mortgage prepayment calculator to estimate the amount of your savings.As it is mortgage prepayment sounds really good, and while it does work for many people, it’s not perfect. You could even find yourself being fined for making a mortgage prepayment, because some mortgages have penalties for those who prepay. So before you take any mortgage prepayment actions you need to contact your lender and see if you could pay some penalties. In much the same vein, you might end up losing money if you do not pay enough each month. It’s possible since interest payments are tax deductible and if you are paying off more you will have less to deduct over the term of your loan. So if this will be your case then, instead of the mortgage prepayment option it would be better to save your money and invest it in a high yield investment.
You already know that your rate is going to increase if you’re into an Adjustable Rate Mortgage, or AMR. You already know that a mortgage prepayment is out of the question in your case since you will incur the prepayment penalties stipulated in your contract. Well what you need to understand is that you don’t have to wait for the mortgage prepayment penalty to expire so you can start the refinancing process, if you wish to switch over to a new fixed rate mortgage.
If you are locked into adjustable rate mortgages you know as a fact that the mortgage rates will adjust this year or later on over the next years, and you may want to think about refinancing before your mortgage prepayment penalty expires than risk paying a much higher rate when it comes time to refinance at the end of your penalty period. You should know that in most cases the mortgage prepayment penalties are seen as mortgage interest, and they are tax deductible as such. Also if there’s enough equity in your home to allow you to pay for the penalty, then you should refinance right away while the programs are flexible and rates are still low. You should do this to reduce the likelihood of not qualifying for a good rate, or not qualifying for a refinance at all when your mortgage prepayment penalty period will expire in the future. You should always consult your CPA regarding any matters that pertain to your personal tax situation.
You must also know that if you were going to refinance and pay your mortgage prepayment penalty, lenders will not be open to waiving their mortgage prepayment penalty, not even for one of their valued customers. Lenders can’t afford not to collect the penalty amounts, even if you refinance with them, they’ll probably tell you that waiving the penalty would amount to a federal offense since it’s written in the contract, which isn’t really true.
Anyway, you shouldn’t think that you would beat the mortgage prepayment penalty without any difficulties. But you can use a mortgage prepayment scenario calculator and better estimate the situation.
For more tools, visit the collection of mortgage calculators presented on mortgagesum.com
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