Should you pay your mortgage down faster?

Are you in a position where you’re wondering whether you should pay your mortgage down faster? Everybody’s mortgage is different, but one thing home owners have in common is the desire to pay off their mortgage as soon as they can! The good news is that in many cases, there are steps you can take to speed up the repayment process. Here’s some more information on why you may want to pay off your mortgage faster, and how to do so.

Why pay your mortgage down faster?

Before looking any further into the possibility of paying off your mortgage faster, you should first understand why this could be a good idea. Knowing the reasons behind this decision will help you determine if it’s the right path for you. 

Once your mortgage is paid off, you will own your home outright. This is a huge advantage as it allows you to build equity faster. This means you own a valuable asset that you can leverage later on to access cash flow or use as collateral. The sooner your mortgage is paid off, the sooner you stop paying interest as well. Paying your mortgage down even a few years early can save you thousands of dollars in interest that you would otherwise lose. Obviously, clearing your mortgage debt means you no longer have this financial obligation.

Finally, many home owners look forward to the peace of mind that comes with paying off their mortgage. You no longer need to think about your monthly payments or stress over interest rates. The only thing left for you to do is enjoy your home!

Examine your prepayment options

So, how do you actually pay your mortgage down faster? You may be able to take advantage of prepayment privileges, depending on your mortgage contract. Prepayments are payments you make in addition to your regular monthly installments. These extra payments go toward your principal amount, therefore lowering it quicker. If your contract allows you to make prepayments, this is a fairly basic and simple way to pay down your mortgage more efficiently. 

The important thing to note is that prepayment privileges are not limitless. This means you won’t be able to make as many payments as you’d like, at whatever size you want. Your contract will state how much you are allowed to contribute in prepayments. If you try to go over the limit, you will likely be penalized. Of course, this would defeat the point of trying to pay off your mortgage early if you end up collecting extra fees along the way. Be sure you understand your contract and stay within the limits of your prepayment privileges. 

Consider shortening your amortization period

Another method of clearing your mortgage debt more quickly is by tweaking your mortgage itself. More specifically, you would be looking to shorten your amortization period. Your amortization schedule is your timeline for paying off your mortgage. Longer amortization periods mean longer mortgages, because payments will be stretched out over time. Of course, the longer your mortgage, the more interest you will pay, since you will owe interest with each payment. 

If you are in a position where you can afford to make larger or more frequent payments, you can consider shortening your amortization schedule. This will condense your mortgage into a shorter period of time, allowing you to pay it off sooner. You will save money in the long run as a result of paying less in interest. However, you risk feeling financially crunched in the short term due to the larger payments. It’s important to be confident you can comfortably take on this shortened period!

Schedule a meeting with your mortgage broker!

If you are looking for ways to pay your mortgage down faster, your first step should be to reach out to your local mortgage broker. We can help you determine your best path forward! Trying to go through this process alone can be risky. You may accidentally break one of the rules in your contract, resulting in penalties and fees. You could also end up biting off more than you can chew trying to make larger payments. It’s best to work with a broker to gain the most accurate sense of your financial situation, and what your mortgage allows you to do.

Navigating your mortgage doesn’t need to be complicated. Whether you are a current home owner, or a future buyer with questions about the mortgage process, we are here to work with you and set you up for success.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.