What do you do when you receive an extra chunk of cash that you weren’t expecting? 

We certainly have ideas for you (though you probably won’t have any issue coming up with some on your own)! You can buy something that has been on your wishlist or that of your family’s. You could use it to go on vacation. Or you can also stash it away for emergency purposes. 

Another, perhaps more practical use for your extra money is to pay off some of your debts and/or bills ahead of time. For instance, you can use your extra money to pay your mortgage payments. Yes, it is possible to pay in advance for your mortgage. 

You may wonder, how far ahead can I pay my mortgage? Does paying your mortgage in advance reduce the next month’s payments? And how many months ahead can you pay for your next premiums? 

We will discuss whether you can pay your next months’ premiums in advance and how many months of premiums you can pay for. We will also explore the benefits and disadvantages to this payment strategy. 

How Far Ahead Can I Pay My Mortgage?

You can prepay your monthly payments in your home loan. And there is no real limit to how far ahead you can make this prepayments or any additional payments on your mortgage.  

There are many ways you can pay for your future month’s mortgage payments. One method is through a lump sum where you pay it all off at once.

Another way you can prepay for your home loan is by adding a little extra amount to your standard monthly premiums. 

As many of you may have already guessed, prepaying your home loans comes with some nice benefits. Yet, at the same time, there are also some disadvantages to doing so. Let’s look at both sides so you can decide whether it makes sense for you to make some early payments.

Benefits Of Mortgage Prepayment

The biggest advantage for most people for making early/additional payments on your mortgage is you can save a ton of money. Specifically you’ll save on the amount of interest you pay. The more quickly you pay off your loan, the more you’ll save in interest. And, depending on the size of your loan and the interest rate, this can add up to a huge chunk of money over time.

Another benefit of paying off your mortgage more quickly is that it’ll shorten the amount of time you have the loan. For example, on a 30-year house loan, if you pay 13 payments a year instead of the usual 12, then you may pay off the loan in just 25 years, 9 months. 

The cost savings/shorter loan period lead to other advantages such as using the money that used to go toward your mortgage to pay off other debts. It also gives you more financial freedom to invest or use the money on other things.

Disadvantages Of Prepaying Mortgage

There are downsides to paying off your mortgage early, however.

One is that, if you have extra cash, you may make more on that money by investing it somewhere besides your home. Let’s say you have a home loan with an interest rate of 3%. But you notice that you can buy a CD (certificate of deposit) that’s yielding 3.5%. If this case putting your money into the CD makes more sense from a financial perspective.

Another downside is that you’ll end up paying more taxes. This is because you can deduct your mortgage interest on your taxes each year. This can results in $100s or even $1000s in tax savings. If you pay off your mortgage early, then you’ll lose that tax deduction.

Bottom Line on Paying Your Mortgage Ahead of Time

You can pay your mortgage as far ahead as you want to (assuming your lender doesn’t have a penalty if you pay off your mortgage early). There are pros and cons of making your payments early so you’ll want to see if doing so makes sense for your situation.

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