Quote:
Originally Posted by Donger
Make sure that you don't have a pre-payment penalty on your loan. If don't, see if you can add some extra principal reduction every month. If you're just a few months in and have a 30 year note, even a few hundred extra a month will save you thousands and thousands in the long run.
|
errr....wellll....maybe. I'm actually not a fan of doing this, and here is why. If you do not keep the mortgage until you actually pay it off, all you've really done is given the mortgage company an interest fee loan for all the time from when you prepaid whatever amount until you sell the house.
Let me rephrase -- the above advice is terrific if you are definitely going to stay in the house until you pay off the mortgage. Otherwise, it isn't.
And that includes refinancing. If you're going to refinance, then you essentially get no benefit for prepaying, other than having a lower principal amount. You could, of course, pay down the principal WHEN you refi, which means you had that money working for you until such date, instead of given to the bank.
There is also no way to get it back once you prepay, so doing the above definitely comes after establishing a rainy day fund, etc.
Though the above is generally considered sound advice, I actually disfavor it unless you are not good at saving money. If the money will be "burning a hole in your pocket" and get spent, then sure, prepay the mortgage. Otherwise, meh.