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Pro Tip Tuesday!

While most people don't have the "problem" of having extra cash, all of us can benefit from ways to save and budgeting.
One of the most missed opportunities for this in the mortgage world is the extra mortgage payment.

This sounds crazy but essentially if you have extra cash you don't need to stuff into an emergency fund and are looking for a place to invest it, think about putting it back into your home equity.

An extra payment can just be extra cash paid with your monthly payment - whatever you have to give. This is like a forced savings plan. You send it separately with your mortgage payment but this one gets marked "To be applied to principal".

Most mortgages work by having the first few years of mortgage payments being applied directly to interest, not the principal loan amount. Thats now lenders can guarantee some earnings if you sell your home in 3 years. But if you do sell your home quickly, you'll notice when you get to your mortgage payoff at settlement, your loan amount won't have gone down a lot since when you first bought the home.

Adding a little extra cash each month to the principal payment helps rectify that situation.

Even easier is the bi-weekly payment method.

If you are allowed, try paying your mortgage every two weeks instead of once a month (which works well for when your paycheck probably comes in!). This actually allows you to pay an extra month a year (as you'll be totaling 13 payments in a year instead of 12).

While it may not seem huge, it could take down your mortgage term by YEARS! And the principal payments will come back as equity.

However, make sure you do your math. If you have high-interest student debt, car loans or other payments, paying these off faster than a low-interest mortgage may be more impactful. Talk with your mortgage broker, financial counselor or accountant for the best use of your money!


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