Paying off debt as soon as possible is always is a good thing –but does that rule also apply to mortgage debt? Is making an extra payment each month to pay off the mortgage early worth it?
In this week’s post, we’ll explore the pros and cons of paying off the mortgage early.
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Pro: Save On Interest
Making an extra payment to the principal balance of your mortgage helps save you money by lowering the amount of interest you pay. Although you can make an additional payment towards your principle at any time, this method is most effective when you first get your loan. This is because the principle is higher at the beginning of the loan. Hence, you are paying more in interest. Making an extra payment will result in saving in interest over time.
Con: Miss Out On Other Investment Opportunities
If you have the extra cash to put toward making an extra payment, that means that you have the extra cash to invest. Instead of trying to save money on your mortgage, you could, instead, making your money work for you. Making additional contributions to your 401(k), especially when you’re 10 years or more away from retiring, can result in significant earnings –sometimes more than what you could save by paying off your mortgage early.
Pro: Peace Of Mind
Reducing monthly expenses brings peace of mind and considering that your mortgage payment is likely your biggest expense, you can start to imagine how good it would feel to eliminate it early. Also, when calculating the cost of living, inflation, and what the average, fixed, retirement income is, getting rid of a housing expense becomes even more attractive.
Con: Prepayment Penalty – Sometimes
Some mortgages carry a prepayment penalty, meaning that you’re limited as to how much you are allowed to pay off and when. Though this may seem unfair, it’s not all bad news. The types of loans that carry prepayment penalties often have lower interest rates or other perks that save you money.
When it comes down to it, deciding to pay off your home loan early is a personalized is not a one-size-fits-all decision. It depends on your ability to pay, the type of loan, how mature your loan is, whether your extra cash would be more useful in other investments, how close you are to retiring, as well as other factors.
Even if you don’t currently own a home, if you plan to pay off your mortgage early, then you’ll want to make sure you choose a home loan that allows for prepayment.
Call Tara Mortgage Services today for expert and personalized home loan guidance, and together we can find a mortgage option that works for you.
“What happens on closing day and after?” That’s a question we get asked often.
On closing day, you’ll sign documents to finalize the transaction and release the funds from your home loan. You’ll also receive digital or paper copies of all the signed documents plus the keys to your new home.
It seems pretty cut and dry, and for the most part, it is! Most of the loan processing work will be complete by this point.
In the whirl of excitement that you’re moments away from becoming a homeowner, you might get confused on what’s actually going on on closing day.
Here’s a quick break down of what you can expect on the day your loan closes.
What To Expect The Day Your Home Loan Closes
There are several “parties” involved in making your loan possible, and they all play a part in your closing, too. Some of these parties include your loan officer or broker, your realtor, lawyer, underwriter, title company, seller, the seller’s realtor, and you.
Each party makes sure that all is correct and complete with your loan. The final “package” can be quite extensive which is why you’ll receive it several days before the actual closing date, giving you the time to look it over.
There are several documents that need signing. They may vary somewhat, however, for the most part, these are the documents you’ll be signing on closing day:
Closing Disclosure: This contains your final loan terms and details about your closing costs.
Mortgage Note: This is essentially a “promise” to repay the loan.
Mortgage or Deed of Trust: Lays out the details of what happens should you fail to repay the loan.
The Deed: This legally transfers ownership of the property to you.
Closing day is also when you’ll pay the closing costs and your down-payment. Remember that both of these payments should be done with a certified check, not cash or personal check. Be sure to also bring a copy of your proof of insurance (don’t worry, we’ll remind you of all of this on closing day) and that’s it!
If your possession date is the same as your closing date, you’ll receive your keys then. If your possession date is different, you’ll know about it ahead of time. It’s noted on your purchase agreement and we’ll make sure you’re clear on all the closing date details before you sign.
These are other things that’ll happen after closing. They’re not directly related to your loan but just a few things to keep in mind.
Offers in the Mail. Home sales are public record so be prepared to receive lots of mailed offers for home services, legal services, and maybe even mortgage protection insurance.
You may find some of these offers useful but research before committing. There are scammers that will send you an offer appearing as if it came from a reputable lender or other mortgage service provider.
Possible Payment Changes
Terms of your loan won’t change, that is, unless you have an adjustable-rate loan or if you refinance. However, it may be possible for your payments to vary slightly due to changes in your escrow account.
For example, if the property taxes or insurance increases, your mortgage payments will also increase. Don’t worry about ever “overpaying.” If there are any overages in your escrow account, you’ll get a refund.
The home loan process has many moving parts right up to the very end, but we’re here to make it all clear and keep everything on track for you. You can count on Tara Mortgage Services to be your trusted resource for all your home and property financing needs.
SEATING ADDED! Alex Deacon’s RE workshop this Saturday is so popular, we’ve added extra seating to accommodate the demand! Alex is bringing in Josh Caldwell as his special guest speaker for added punch! RSVP below while seating is still available!
How to find and analyze my next RE Investment
Saturday, Oct 13, 2018, 10:00 AM
Hampton Inn Bridgeville 150 Old Pond Rd Bridgeville, pa
62 Members Attending
This is our most widely asked for workshop. We do this a few times a year and it will contain the steps you can take right now with very little experience. You can implement these steps and start using them in your day to day investment journey. We will discuss and hit on a few very important ideas on how to do the following 1. Where to look for th…