It’s tempting, if you can afford it, to make two mortgage payments a month. This will help you slash the time it takes to pay off your mortgage loan. And over time, it can save you a significant amount in interest payments.
And let’s be honest: It’s nice not to have make those mortgage payments each month.
But there is a case when doubling up your monthly mortgage payments isn’t the wisest financial move. And that’s when you have other forms of debt that come with higher interest rates.
You say that the interest rate on your 30-year fixed-rate mortgage loan is at 4.75 percent. That’s a low rate. Just 10 years ago, such a rate would’ve been thought impossibly low.
Now, let’s say that you do have enough money to double up your mortgage payments each month. This is a bad financial decision if you also have a lot of credit-card debt. That’s because the interest rate attached to credit-card debt can be sky-high, often 18 percent or higher. Instead of making double mortgage payments, you should pay off your more expensive credit-card debt.
If you have extra money, it makes more sense to pay off the debt that comes with the highest interest rates. That more than likely won’t be your mortgage debt. Mortgage interest rates are still at historically low levels. The same, unfortunately, can’t be said about other forms of debt, especially credit-card debt.
Here’s another word of caution: If you do double up your mortgage payments, make sure that you have a financial plan for after your mortgage disappears. When you no longer have a mortgage payment each month, you will have extra money. Make sure to invest that extra money into an investment vehicle that will earn you even more dollars. Don’t waste it by simply upping your monthly spending.