What are the benefits of prepaying my mortgage?

Posted By Freelance On December 7, 2007 @ 10:04 am In Financing a Home, Consumer News and Advice | Comments Disabled

You get to save thousands of dollars and shave years off the life of your loan because the additional payments made toward your monthly principal basically constitutes a partial prepayment of your mortgage.

Each mortgage has specific terms describing how and when prepayment may occur. Some lenders impose a penalty if you repay the loan too soon.

The total savings potential also will depend on how long you plan to live in your home. If you expect to move in the near future, do not expect to reap savings as large as those gained by people who pay ahead of schedule until they own their home free and clear.

What is a prepayment penalty?

Posted By Freelance On December 7, 2007 @ 9:46 am In Financing a Home, Consumer News and Advice | Comments Disabled

Some mortgages have prepayment penalties written into them. This means you will have to pay the lender a percentage of the principal, or some other stated amount, if you decide to repay the loan early.

The prepayment clause is usually in effect for only one to three years and may be waived for special circumstances. Lenders impose the penalty to recover any losses related to your early payment.

Ask about prepayment penalties before signing for a home loan. If you are applying for a new loan, the penalty should be disclosed in the truth-in-lending statement.