Prepaying: How everyone can save money on their mortgageby Tim Manni
The past few years, while mired in economic struggles, has played host to one of, if not the longest, refinance booms in history. Historically-low mortgage rates and specific programs designed to target a wide audience of homeowners have allowed countless Americans to reduce their monthly payments by refinancing.
But what about those who haven’t refinanced, either because they don’t want to or they can’t? Is there a way they can save thousands? Absolutely. The answer is prepaying your mortgage.
Prepaying your mortgage
When you prepay your mortgage, whether you’re a recent refinancer or not, the financial result is instant. While you won’t feel the effects immediately by having more money in your wallet each month, you’re automatically reducing the interest costs you’ll be paying over the life of your loan.
Sure, simply refinancing to a lower rate puts dollars back in your pocket, but unless you’ve reduced your loan term or kept it about the same, your long-term costs could far outweigh the cash you’re saving each month with a lower monthly payment.
What homeowner doesn’t want their mortgage paid off ASAP? Sure, paying down debt is all about managing your current cash flow, striking the proper balance between reducing your debt while having enough cash on hand to handle your other financial debts and obligations, but what if you could control your debt reduction by having a definitive payoff date in mind?
Prepayment mortgage calculators
HSH.com has developed two new mortgage calculators that show homeowners—recent refinancers or not—the power of prepayment.
Have you ever wondered: What’s it going to take to get this mortgage paid off before I retire or before I get to age 55? You might not know that you can essentially make your mortgage any term you like by making simple fixed prepayments each month.
You tell us when you want your mortgage to go away, and HSH.com’s “It’s My Term Prepayment Calculator” will tell you exactly how much you’ll need to do it and how much you’ll save by doing so.
If you don’t have enough disposable cash on hand to make significant prepayments, you can still work to reduce your mortgage costs by rounding your mortgage payment up to the next whole-dollar increment.
HSH.com’s RoundUp Prepayment Calculator employs this simple technique that can bring big savings without damaging your delicate budget. Even simply rounding up to the next one dollar might save you hundreds of dollars in interest costs over the life of your loan.
So, whether or not you’ve already refinanced, or whether or not you have disposable income on hand, prepaying your home loan can bring on significant savings for all homeowners.