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, 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 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. Believe it or not, there are lending institutions out there that will penalize you for attempting to reduce the massive bonuses they pay to the top executives -- despite the fact that they will still make a great deal of money on your house loan.
Get Your Share of the Bailout Money!
Here's a pet peeve of mine. During the early 2000s, lending institutions borrowed too much money to people who had not proven themselves to be credit-worthy, all for the purpose of getting as rich as legally possible on the backs of hard-working men and women.
In a nutshell, this ultimately caused the financial dominoes to start falling that eventually led to the economic collapse of 2009 -- which put many of those hard-working men and women out of work and out of their homes.
And what happened to those that managed to keep their jobs and stay in their homes?
They were saddled with having to foot the bill for bailing out the failing financial institutions that were responsible for the financial meltdown in the first place.
And what did those financial institutions do with a large chunk of their bailout money? They used it to pay outrageous bonuses to the same top executives whose idiotic decisions put millions of Americans out of their jobs and homes.
Does that make you mad? Mad enough to do something about it? If so, then here's an idea on how to get back some of your tax dollars that ended up in the pockets of lending institution executives.
Every dollar you add to paying off your debt early is like reaching into the pocket of one those overpaid executives and taking back a portion of the money you worked so hard to earn. Their pockets are teaming with money that was originally meant to support your family's future financial well-being -- but instead is being used to build lavish tennis courts and swimming pools in the backyards of their second and third mansions.
The extra payment mortgage calculator will show you that foregoing small, non-essential purchases, for making extra payments on your debts (preferably your higher-interest debt first, then on your house loan) can take thousands of dollars of your money back from the executives whose ruthless quest for wealth nearly bankrupted your country. Consider this savings as your rightful share of the Bailout money that was misappropriated to executive bonus checks.