When going through the mortgage process, most people choose a 30-year fixed-rate home loan. This can be a long period of time to wait before owning your home in full, so you may consider making an attempt to pay it down early. However, this isn't always the best move.
– Do you have a lot of credit card debt?
When making extra mortgage payments, you are taking money away from other areas, which could end up hurting you in the long run. If you have a lot of credit card debt, you should probably attack those balances before even considering to pay your home loan early – especially if you have high interest rates. When you have multiple debts, it is important to first eliminate the obligations that are costing you the most money. While your mortgage payments may be higher, interest is accrued much faster on credit cards and isn't tax deductible.
– What is the status of your emergency fund?
All consumers should have enough money saved to cover at least six months of expenses, because you never know what could happen You may lose your job or end up in the hospital for an extended period of time, and these savings will give you the financial ability to come out of such a situation without too much damage to your bank account. If you don't have this much saved, you should contribute any extra money to your emergency fund before paying down a mortgage early. Even if you feel secure, you can never have enough money saved, so you may still want to boost your savings as opposed to attacking your mortgage before its term ends.
– Are there any prepayment penalties?
Before completing the mortgage process, you should be sure to ask your lender if there are any prepayment penalties – in case you want to pay your mortgage off early. But, there is probably a good chance you don't know this information, so you should inquire with your lender before making the decision to pay down your home loan early. If there are prepayment penalties, you should probably avoid attacking your mortgage early, as it will end up costing you money.
To receive a free quote, simply visit www.capwestmortgage.com/quote or call (866) 614-5959 to speak with a CapWest Mortgage representative today.