Don't Lose Money On Your Early Mortgage Payoff Plan
Before starting an early mortgage payoff plan please consider the following cases where it may end up costing you money instead of saving you money.
Higher Interest Rate Debt
If you have other debts that have a higher interest rate than your mortgage, you will save a lot more money if you pay off the higher-interest debt first, and then redirect those higher-interest debt payments to paying off your mortgage.
Employer Matches 401K Contributions
If your employer matches all or part of your 401K contributions, you may be better off contributing the extra payments to your 401K. So be sure to check with a qualified financial planner (one who will not be making commissions off of your investments, and who is not trying to sell you life insurance) before starting your accelerated mortgage payoff plan.
Mortgage Company Penalizes You for Prepayments
Be sure to check with your mortgage company to make sure you can prepay your mortgage without penalty. Believe it or not, there are mortgage companies out there that will fine you for cutting into their forecasted profit margins -- despite the fact that they will still make a fortune off your home loan.
Mortgage Company Escrows Your Prepayments
Check to make sure your mortgage company doesn't simply escrow your prepayments (applying them at the end of the loan term) instead of applying them to the balance when they are made. If so, your prepayments will likely be better invested elsewhere.
How a Coffee Habit Can Cost You $33,000, or More!
Are you one of those people who have a habit of purchasing one or more $3.00 cups of designer coffee (flavored water) each day?
If so, you may be shocked to learn that if you brought a thermos from home and applied the daily cost of a cup of coffee to your mortgage, you could pay off your mortgage 5-years ahead of schedule and save $30,000 in interest charges.
If you have a $150,000 home loan, financed at 6% for 30 years, your monthly payment would be $899.33. Using the early mortgage payoff calculator we can see that if you added just $67.13 per month to your house payment (roughly the cost of a designer cup of coffee per workday), you could pay off your home loan in 25 years and save $33,821.65 in interest charges in the process.
Just imagine what would happen if cut out buying all forms of flavored water and applied those savings to paying off your debts as well?
Of course, this begs the question, "What will you have to show for your designer coffee investments after 30 years?"