Paying Down Your Vero Beach Mortgage Wisely
Can’t wait to have your Vero Beach mortgage paid off so you can do other things with that money each month? There are some smart ways to reach your financial goal of paying off your Vero Beach mortgage faster, and wiser.
Refinance Your Vero Beach Mortgage to a 15-Year Term
Getting a 30-year mortgage is the common track most people follow when getting a Vero Beach mortgage, mainly to keep their payments as low as possible. If you can afford the higher monthly payments on a 15-Year term, consider refinancing to the shorter term loan. You’ll usually get a lower interest rate, and you’ll pay off your Vero Beach mortgage sooner, thereby reducing the amount of interest you pay over the life of the loan.
The trade off is, your monthly payments will be higher because you’re paying more of the principal each month. Here’s an example:
$250,000 30-Year Loan @ 5.0 percent, monthly payment is $1,342.05 $250,000 15-Year Loan @ 4.5 percent, monthly payment is $1,912.48
The total interest you’d pay on the 30-Year Loan would be $233,139.46
The total interest you’d pay on the 15-Year Loan would be $94,246.98
So as you can see, shortening your Vero Beach mortgage to 15 years saves you a ton of interest over the life of the loan.
Make Extra Payments When You Can
If refinancing to a shorter term is not possible for you, consider making extra principal payments each month. When you pay more than your loan requires, and when you designate the extra payments to be applied against the principal balance of your loan, you end up reducing that balance at an accelerated rate. Be sure your lender applies the extra payment towards principal and not towards future payments owed, or you’ll just be giving them the gift of interest they haven’t yet earned.
To achieve the greatest benefit, the increase should be at least 1/12th of a normal monthly principal and interest payment.
Check Your Property Taxes and Insurance
For most people, their Vero Beach mortgage payment includes four things: your principal, interest, property taxes, and insurance – which is collectively called your PITI.
Most people tend to focus on the principal and interest when they’re looking to pay down their mortgage faster. The amount you pay in property taxes and insurance, however, is often overlooked and this could be a big mistake.
If your property tax rate was set during the heady boom days of Vero Beach real estate, you might be paying taxes based on an assessment that’s no longer valid. It might be worth it to protest the assessment with your county to see if your rate should be re-adjusted to reflect today’s lower home values.
Re-investigate your insurance. If you opt for a higher deductible, you could get a lower premium, which will result in a lower monthly mortgage payment.
If your property taxes are lowered after the re-assessment, and/or your insurance premium is lowered, you can continue to make the same monthly payment and more of your money will be applied towards the principal and interest, which will help you pay down that loan much faster.
Hopefully these tips to pay down your Vero Beach mortgage faster and more wisely will help you become a better handler of your finances. For more mortgage tips, check out our Vero Beach Mortgage Info section under Vero Beach Real Estate Categories to your right.