Reasons for Paying Extra
If you have an escrow account. you pay into it every month so that when it’s time to make a property tax or insurance payment, you’ve got enough money saved up. Property taxes can change sometimes, which will make your monthly payment change as well.
Some people like to pay extra into their escrow to make sure they don’t get an unpleasant surprise later on. Then, if you happen to overpay your escrow account, you’ll get an overage check from your lender so you’re not losing any money in the long run.
The other common reason to pay extra is to pay off your mortgage faster. An amortization schedule is the schedule of payments that you would have to make for the term of your mortgage to pay it off, or amortize, your loan at the end of the term. If you pay more
than the minimum amount, your mortgage will amortize faster, which will get you out of debt and could save you thousands of dollars in interest. You can use the Quicken Loans Amortization Calculator to see how different payment amounts would help pay off your loan sooner, and how much interest you’d save in the process.
Both paying extra on escrow and making extra payments can be good ideas based on your goals and needs, but if you just assume your lender can read your mind, the extra money you send in might not get applied the way you want. So if you want your mortgage payment process to go smoothly, be very clear about what you’re doing.
What are some of the payment mishaps or questions you have?
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