Mortgages are obviously very expensive and very worrisome if money is tight. Interest also increases your payment by sometimes two times or more than that. What if you started paying off your mortgage faster? What if you always had enough money for emergencies and living and you were still able to cut that interest down by even just half?
Paying off your mortgage early will also gain you equity in your home so that you can actually own the place you live in and pay for. Keep reading to find out what you need to do before your next mortgage payment to always be financially safe and trim down that pesky interest.
Step 1: Evaluate Your Financial Position
The first thing to do before you think about paying more monthly for your mortgage is to evaluate your credit, savings, checking, debt, and income. Knowing exactly how much you own, how much you make, how much you owe, and any major future expenses will tell you just how much you can safely spare to pay extra.
Knowing exactly what and how your insurances (health, car, house, life, etc) work is entirely necessary too and will help you create your emergency fund in the next step.
Step 2: Create an Emergency Fund
It may seem silly, but keeping an emergency fund is imperative of a financially steady life. There are many unknowns in life such as car repairs, house damages, theft, unplanned pregnancies, funerals, job loss, medical emergencies and more.
If any of the above or other emergencies or unexpected events occur, all the new income and a lot of your savings need to go towards this instead of your current bills. This will only hurt you in the long run, as then you will accrue more interest in postponing payments and can even rack up late fees. The ideal amount to have in an emergency fund is three times what you need in a month.
NEXT: Before you make any rash decisions
Dana George-Berberich is a freelance reporter and novelist. She has written finance articles for newspapers across the country and for companies like Dun & Bradstreet and Bankrate.
