Looking to save a little money on your mortgage? You could consider prepaying your mortgage. Just like it sounds, prepaying means submitting more to the loan company than is required. Depending on how you go about this and if your lender allows it, this can be a way to reduce the number of payments you'll need to make over the life of your loan, which in turn saves you money as less interest will accrue. Learn more about the mortgage prepayment process below.
It's not for everyone. If you have a low interest rate and a monthly mortgage payment that fits your current budget, trying to prepay may strain your finances. You may also decide against prepaying if you're currently paying off other debts like student loans, car loans, credit card debt or medical bills.
Finally, your mortgage may also carry prepayment penalties. If that's the case, the cost of prepaying may be cost prohibitive.
To see if prepayment makes sense for your unique situation and to view your mortgage prepayment options, use our monthly payment calculator. This calculator will show you your amortization schedule, which outlines the progress you're making on paying down your mortgage. You can then enter various prepayment scenarios to see how much your monthly payments could increase and how much you'll save on interest in the end.
Your monthly mortgage payments are comprised of both the loan principal and the interest. When you pay more than the monthly payment, contact your lender to specify where you want that extra money to go. Your lender may need something in writing or they may just note it over the phone. But, make sure that the extra funds are applied to the principal. Otherwise, you're not actually prepaying your mortgage; you're just paying interest.
There are several ways you can go about increasing your monthly mortgage payment amount:
If you're like many homeowners, you probably elected to set up automatic payments for your mortgage so that you'll never miss a payment. It's possible to do this for a mortgage prepayment as well, but again, you'll want to contact your lender to confirm how your prepayment should be noted. For example, you may need to set up a separate automatic payment for the extra funds and include a note or comment indicating it should be applied to the principal. You may also just be able to increase the amount of your monthly payment. In addition to the ease of 'set it and forget it,' setting up automatic payments can also help you stick to your prepayment plan.
If you still have questions related to prepaying your mortgage or perhaps just mortgage questions in general, contact a Citizens Bank home loan advisor at 1-888-514-2300.