BOULDER, CO, Apr 25, 2024—Maybe you got a big pay bump at work, or a family member has gifted you a large chunk of change. Whatever the reason, you're suddenly able to pre-pay your mortgage—this means paying it off before your allotted time is up (say, 30 years).
“When you pre-pay your mortgage, you nearly always win big,” explains Phil Boren, Broker Associate of RE/MAX of Boulder, Inc.. Not only are you out of debt faster, but you get to save thousands of dollars by avoiding years of interest. Pre-payment also works gradually, say if you make two payments a month instead of one, or a larger monthly payment than required. Over time, these additional payments add up and you pay down your debt faster.
Of course, the total savings potential will also depend on how long you plan to live in your home. “If you expect to move in the near future, do not expect to reap savings as large as those gained by people who pay ahead of schedule until they own their home free and clear,” says Boren.
However, Boren offers a warning: Each mortgage has specific terms describing how and when pre-payment may occur. “Some lenders impose a penalty if you repay the loan too soon,” notes Boren.
If you're shopping for a loan and think you may be able to pay the mortgage off faster than noted, talk to your lender about possible pre-pay penalties so you know what you're getting into.
For more real estate information, contact RE/MAX of Boulder, Inc. at philboren@gmail.com, 303-441-5647, or RE/MAX of Boulder, Inc..
Phil Boren is a 26-year veteran real estate Broker and Realtor, specializing in consulting with buyers and sellers in Boulder, CO and along the Front Range of Northern Colorado. Held Real Estate Broker's license in Texas, California and Colorado; Managing Broker for over 200 agents and Brokers for Century 21 and RE/MAX franchises. Award-winning Realtor with experience in management, sales, marketing, relocation, appraisal, REO, BPO's, foreclosures, short sales; previously held the MAI designation from the Appraisal Institute. Experienced in both residential and commercial real estate and achieved the No. 14 individual ranking in the 5-state, Mt. States Region for RE/MAX International in 2001, based on sales volume. Received my BSBA in Finance and Real Estate from the University of Arkansas in Fayetteville, where he was a 4-year starter and 4-year football letterman for Hall-of-Fame coach, Lou Holtz.