Mortgage Renewal Question…
Wondering if anyone has experience with the following - mortgage up for renewal - plan is to have mortgage paid off within the next renewal period - but have the option to take longer as doing so would pay off mortgage before original amortization period.
If a closed rate allows extra payments up to 15% of the original principal and the remaining amount on the mortgage at time of renewal is less than 15% of the original principal, does that mean it can be paid off at any time?
If mortgage is on track to be paid off early - is there any benefit of now reducing payments and keeping the mortgage for a longer period of time? For example, if a reno was needed would if be more cost effective to add to an existing mortgage than starting a new home equity loan?
Thnx in advance for any comments…
Posted Feb 4, 2022, 1:23 AM UTC
For your first question, the answer is probably but you should check with your lender to be sure.
For the second, it all depends on your budget and cash flow outside the mortgage payments, as well as your risk tolerance. Aggressive investors will tell you that with mortgage rates so low you’d want to never pay anything extra on a mortgage and move all your extra money to investing. Very conservative people will want to pay off the mortgage ASAP. Spenders might want extra cash to go on a post-COVID cruise. There are benefits to both sides depending on your values and financial situation.
With specific regard to a Reno possibility, if you don’t already have a readvanceable HELOC associated with the mortgage your best bet is to get one set up at this renewal. Use that for Reno/repair type stuff, and you can convert a portion of it back into a mortgage/loan at any time if you so choose.