Should I Prepay My Mortgage?

A reader asks:

I am planning to live in a house for next 6-7 years which I just purchased. Is it advisable to pay accelerated mortgage ( biweekly or 13th payment) compare to monthly payments.
Would appreciate your suggestion. Thanks!

This is great question, and one I hear often: Should I prepay my mortgage?

There are a few things to consider:

1. First, I would not recommend you pay any fees to get a bi-weekly or accelerated mortgage. This is something you can easily do yourself for free. Just take your mortgage payment, divide by twelve, and send in the extra amount each month with your payment. There is an article on our site that talks about do it yourself mortgage prepayments.

2. It’s great you are in a position to pay extra on your mortgage. It’s a risk-free, tax-free way to build wealth in your home. However, I would first encourage you to make sure you have adequate savings reserves that are liquid (easy to get to). If you run into a financial crisis due to a layoff, disability, etc. it may be difficult at that time to tap the equity in your home quickly.

My colleague and the true expert Marc Eisenson wrote a book about prepaying your mortgage called The Banker’s Secret. He also wrote a chapter on pre-paying in the book I co-authored with him and Nancy Castleman entitled Invest In Yourself: Six Secrets to a Rich Life. I am going to send you an autographed copy for your library.

(Yes, that’s a hint for those of you who may be thinking about asking a question. Ask and you may receive!)