Boston area mortgage holders often ask questions about the best way to prepay their home loans – and save money in the process. Follow these tips and you can save thousands of dollars in interest over the life of your mortgage. In addition, prepaying your loan will mean it will pay off earlier than the original term.
Boston Area Mortgage Holders Can Save Thousands
Prepaying your mortgage by just one additional payment a year can reduce a 30-year loan down to roughly a 23-year term. When you pay bi-weekly (every other week) for example, you’re really making 26 half-payments (52 weeks divided by 2 equals 26 weeks.) You could also make an additional payment at some point during the year to effectively make 13 monthly payments instead of 12. Still, some people like to add 1/12 of their mortgage payment to each monthly payment and accomplish the extra payment that way.
Some mortgage lenders charge a fee for prepayments. Hopefully, if you already have a mortgage, yours doesn’t contain a prepayment clause. The majority of Boston area mortgage lenders allow prepayment without penalty. If you’re shopping for a mortgage or are considering refinancing, avoid signing a mortgage with a prepayment penalty.
Prepaying your mortgage works best when you pay the same amount each month. Decide whether you’re going to pay an extra $50, $100 or whatever amount you choose and stick with that amount for at least a year. When you change the prepayment amount, just make sure you keep a written record and check your statement closely to see that the extra amount has been subtracted.
Regardless of how you make any extra payment(s) – or if you decide to make a lump-sum payment – make sure your lender enters the payment properly. If you question how, or if, it was applied, contact your Boston area mortgage lender immediately so they can either explain it to you or correct it if it’s in error.
You can find a lot more Boston area mortgage information in our Boston Mortgage Info section of articles to your right just below the Boston Real Estate Categories. We also update mortgage news constantly on Twitter and Facebook. We hope you’ll check us out there as well.