There are pros and cons of prepaying your home mortgage which you need thoroughly consider. With the recent reduced interest rates, homeowners ask if they should prepay their mortgage or not. A number of them feel it can be proper for them to just refinance. Other people believe that making extra mortgage payments so as to pay off their loan sooner is the proper thing for them to do.
In the eyes of many, a prepayment is basically good investing. Any extra cash that a person may have may be utilized to invest at the reduced interest rate. For most buyers, that is a pretty big investment.
You must initially pay attention to whether you have exactly what is called a "prepayment penalty clause". That means you will have to pay a bit of money if you prepay your loan. These loans will usually come with reduced interest rates.
A prepayment can still likely be a good idea, even when you do have this clause. With a lot of them, you can still pay up to 20% of the loan yearly. A homeowner has merely to add the sums and find out if it will cost him higher in the long run.
The reason for prepayment has a lot of valid points. It could be very relaxing to know there is no longer a monthly property payment. Those homeowners who are trying to get rid of their debts can use this as a way of getting there. If you are not sure that you are going to be employed in the coming days, mortgage prepayment is a solid option.
Prepayment of a loan is one type of investment with a guaranteed rate of return, which you don't have with the stock market. It is also an excellent strategy for those who wish to retire early. They can simply start putting the same amount as the mortgage into a savings account for the time they retire.
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