Things to Consider Before Making Extra Payments
Higher Interest Rate Debt
If you have other credit balances that have a higher rate of interest than your house loan, you will save more time and money if you pay off the higher-interest credit balances first. Then, once the higher-interest credit balances are paid off, redirect those debt payments to paying off your mortgage.
Employer Matches 401K Contributions
If your employer matches all or part of your 401K contributions, you might come out ahead by contributing the extra payments to your 401K instead. So be sure to run your plans past a qualified financial planner (one who will not be earning commissions from your investments, and who is not trying to sell you life insurance) before starting your extra payment mortgage plan.
Will Extra Payments Be Applied or Escrowed?
Be sure to check with your home lender to make sure you can make extra payments on your mortgage without penalty. Also, ask if the extra payments will be applied to the principal as they are made, as some lending institutions will escrow the extra payments and only apply them at the end of the mortgage.