You get the mortgage, move in,
make the payments, and pay it off eventually, right? Most homeowners overlook
the mortgage payment as a financial tool for money management. Smart homeowners
know that by properly adding to their monthly payments, even by a small amount,
they can substantially reduce the term of their loan, not to mention the total
interest they will pay. In fact, prepaying one full year of a standard mortgage
can save thousands of dollars in interest. The key is to do it properly and to
find the right lender for whom prepayment is not a problem.
More progressive lenders allow the option to add
money to the monthly payment which goes directly to the principal. How much
should you add? It's largely a personal decision, and it depends on your cash
flow. But be mindful of the fact that the mortgage interest rate is probably the
lowest interest loan you will find, so don't short yourself with prepayment only
to run up credit card debt!