Choosing to Pay Off Your Greenwich Mortgage Early
Should you pay off your Greenwich mortgage early, or to invest the extra cash? Greenwich lenders hear this question every day.
Some lenders argue that it makes more financial sense to invest additional savings in the stock market than to pre-pay your Greenwich home loan. In our current economy, however, investing in the DOW might not increase your nest egg. Unless you know of a guaranteed DOW pay-off, you could be better off putting your money towards a more certain investment - your home.
While investing in the stock market might create longer-term liquidity because your money is not trapped in your home, pre-paying your Greenwich mortgage can be extremely beneficial. Here’s why.
Remove Your Most Costly Monthly Expense
For a majority of Greenwich homeowners, a home loan is their largest monthly expense. By eliminating your largest monthly expense, you’ll dramatically increase monthly cash flow and have more money to invest in future years.
Save Thousands in Interest
If you have a Greenwich, Connecticut home loan with a high interest rate, it’s smart to pay it off early. Otherwise, you’re just spending your well-deserved savings on mile-high interest payments. Studies show that most Americans pay over $10,000 in mortgage interest payments each year. Think of the long-term savings you could enjoy if you paid off your Greenwich mortgage early and became free of that smothering interest payment.
Costs and Benefits
Let’s assume you have a 30-year Greenwich home loan worth $250,000 at 6 percent interest. If you remained on the 30-year track, your monthly payment would be $1,500 for 30 years. Total interest payments, however, would be more than $260,000 over the life of the loan. That transforms a $250,000 home loan into a $510,000 mortgage!
To lower accrued interest, spend an extra $100 each month on your Greenwich mortgage. This minor addition takes a 30-year mortgage down to 25 years, and will save you thousands of dollars. If you have the financial resources to pay even more, say $500 extra each month, this would transform that 30-year loan to a 15-year loan, saving over $130,000 in total interest!
Important Rules You Should Know
If you hope to pay off your Greenwich mortgage early, note the following important home loan secrets.
#1: Indicate that your additional mortgage payments apply to the principal balance.
#2: If you plan to pre-pay your Greenwich home loan, first pay off any debt having higher interest rates, e.g. credit cards.
#3: Avoid putting all of your additional money into your early mortgage payment. You’ll need to keep some additional cash in a money market fund.
#4: Never apply for a long-term Greenwich mortgage if you expect to pay it off in a few years. Keep in mind that interest rates are lower on short-term mortgages, so if you think you’ll pay off your mortgage ahead of schedule, apply for a shorter-term loan and save time and money.
#5: Before making additional mortgage payments, confirm with your Greenwich lender that your mortgage doesn’t have a pre-payment penalty.
Publish Date: 2009-11-14 13:40:16
Greenwich Connecticut Mortgage Articles
