Why Pay more Towards your Mortgage each Month

There are plenty of benefits for you when you pay more towards your mortgage each month than you must. This shows lenders that you are responsible with your money. It also will encourage them to lend you money later on if wish to refinance or to take out a second mortgage on the property.

Reduce Interest

When you have a mortgage, you have to repay the lender what you borrowed plus interest. The amount of interest that accrues on the average 30 y

ear mortgage can be more than $100,000! You can reduce how much interest you pay when you are paying extra on your mortgage each month. The earlier you are in your loan, the more this will help you. That is because with each payment, more of what you pay will go towards the principle due.

Reduce Number of Payments

As you pay off your mortgage in bigger installments, you will reduce the number of payments you have to make before you own it. If you start making extra payments on it when you first get it, you can easily cut 5 or more years off the loan. This is based on making just two extra payments annually. That overall savings means you will be able to start putting more money away for retirement years before you thought you would.

Save on Insurance

It is mandatory to have insurance on a home when it is under a mortgage. However, once you have a certain amount of equity in it, you can reduce the coverage of the PMI insurance. This means you can have some additional savings every single month as well in another form. You can use that extra money to put into savings or even allocate it to pay even more on your mortgage each month than you were before.

Build Equity

As you pay more of the principle balance on the mortgage, you will be able to build equity in that home. You can use that equity to get a line of credit and even to consolidate other debt. You can use that equity to pay for home improvements, college, and more. This can be a great way for you to access money in the future when you need it the most. Equity in your home is the difference between what it is worth and what you owe on it. By making improvements such as adding a deck or an extra room, you can significantly increase that equity value.

Safety Net

You never know when you may have circumstances beyond your control that will prevent you from paying your mortgage on time. When you have paid more towards it, you will be able to skip a payment or two and not be getting dinged on your credit report.

Reduce Risk of Foreclosure

By paying extra, you won’t be in fear of getting behind. You don’t want your home to end up in foreclosure because something occurred that prevented you from staying current on your payments.