Payment Options In Fixed-Rate Mortgages
01 July 2008If you like the option of paying off your mortgage faster with a 15-year term but currently don’t have the finances to pay the higher monthly payment, consider pre-paying your mortgage a little each month. For example, if you start with a fixed rate 30-year term, you will be required to pay a minimum amount each month based on a 30-year amortization schedule. You can pay a little extra each month by sending in an amount that is over the minimum amount required. Note that your minimum payment amount will remain the same each month no matter how much you prepay.
This “pay a little extra” option allows you to budget your finances so that you can prepay when circumstances allow. One way to discipline yourself is by establishing a reoccurring online payment schedule through your financial institution. You can also use an outside bill paying service to make your payments. But there is a cost to such services. Be aware that some mortgage lenders penalize on prepayment. If a lender offers you a mortgage product that has a prepayment penalty, negotiate the terms to have that prepayment clause removed.
