The idea of paying more than what you are bound to pay on mortgage sounds insensible. But after analyzing it in detail, the thought of overpaying mortgage can make a lot of sense. However, it is not simple as it seems. There is a lot to think about putting extra money in mortgage rather than investing it somewhere else. In the end, it is all about assessing the risks and opportunities.
The discussion can be started with looking into how a mortgage is calculated. The amount of loan times the interest rate each month is the monthly payment you are obliged to pay. Real estate taxes, principal, interest and mortgage insurance makes up the total monthly payment.
Higher the interest rate, higher the mortgage payments you will have to make towards the interest portion and vice versa. The portion dedicated to interest decreases and the portion dedicated to principal increases each month the mortgage payment is made. The interest rate each month is calculated based on the outstanding loan remaining.
Here are some of the benefits listed of overpaying your mortgage:
You can also easily calculate how much you save by overpaying your mortgage.
It doesn’t only come with merits. There are some drawbacks associated with overpayment as well.
In this article, you found some reasons why you should overpay your mortgage but some drawbacks are listed as well. Even though there are some disadvantages, the benefits seem to outweigh them clearly.
If you are interested in even more business-related articles and information from us here at Bit Rebels then we have a lot to choose from.
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