As firefighters and first responders, we spend a lot of time training and preparing on the job. When it comes to our biggest financial venture, our home mortgage, we need to prepare as well.
Many of us have imagined being mortgage free. Some have asked us to schedule their mortgage to be paid off by the time they retire from the fire department, or when their young children are scheduled to be off to college.
While it may become a reality for some, making extra payments- even a little at a time- can prove to have many long-term benefits regardless of whether you pay your house off completely or not.
It’s no secret that if you make extra payments towards your mortgage, you will save interest, but did you know it can also increase your equity value and put more money in your pocket as you get older?
If you pay extra on your mortgage, it will save you money over the life of the loan. You can see how this works using our mortgage calculators.
Here’s on example: If you take out a 30-year, $200,000 mortgage at a 4% interest rate, before taxes and insurance, your payment will be $954.83 per month. This will total to $343, 739.01 in payments over the life of the loan. However, if you pay an extra $100.00 per month, you could save $26, 855 in interest.
By making these extra payments each month and reducing your principal at an accelerated rate, you are increasing your equity value. This is a great safety net in case your home value declines at any point during your ownership. If you choose to sell your home, the additional equity means extra funds that can amount to a nice windfall of extra cash.
In addition to increased equity value, another advantage to making extra mortgage payments is that you will shorten the length of your mortgage. Based on the example above, you can shorten your mortgage by up to 4 years by adding that same $100.00 to your monthly payments.
Making those extra payments toward your mortgage can mean more money in your pocket when you retire, which is always nice.
For any other mortgage planning questions or calculations, contact us today. We’re here to help first responders, military personnel and their family members meet their mortgage goals in the simplest, most cost effective manner possible. Thanks and be safe…