Question:

Should I make extra mortgage payments even if I refinance?

Answer:

Making extra mortgage payments may in fact get you great benefits and you may not even need to refinance your mortgage. Or even if you have refinanced already, making extra mortgage payments does reduce the amortization period of your original or refinanced mortgage.

Before you start making extra mortgage payments, talk to the lender and see how they deal with this. If the lender accepts biweekly payments, check whether the lender accepts to apply biweekly payments towards your balance, and biweekly payment can be very effective. Making biweekly mortgage payments generates the effect of making one extra monthly mortgage payment every year.

Bimonthly payments are also considered an option but it involves lender responsibility - you split your mortgage payment in half and mail it to the lender twice a month. To generate any effect, this type of payment requires that the lender applies the extra mortgage payments to the refinance mortgage as received, so that every time you make a payment, the principal is reduced and hence less interest is generated. This type of extra mortgage payments can also be effective unless the lender waits for the second payment to arrive to apply them together towards your refinance or original mortgage.

Simply making an extra payment to the principal can bring you most of the benefits of bimonthly and biweekly payment plans with less hassle. Every once in a while you could write a check to your lender, stating you wish the money be applied towards the principal and are not just sending the next month's mortgage payment in advance.

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