by Kate Flaxx

Created on: August 09, 2010   Last Updated: August 10, 2010

Buying a home is a very encouraged thing to do by almost anyone on money television programs and in money magazines. Owning real estate is said to be one of the best investments people can make because of the significant profit that can be made by the time a family or individual is ready to move out, depending on fluctuations in the real estate market.

Paying the mortgage can easily take up the majority of income received by a family or individual depending on the amount of the monthly repayments. It can be quite a difficult thing to pay and a huge liability to get on top of.  One of the ways to keep on mortgage payments in check is to prepay. In addition to offering you peace of mind, prepaying the mortgage has many other advantages.  Some of the advantages are;

- Staying ahead

- Reducing the risk of fees and charges

- Reduced interest

- Reduced loan duration

- There's always that rainy day

Staying ahead

If you were prepaying a little extra payment to your monthly mortgage payment, even a small amount like $20.00 per week, $40.00 per fortnight, or $80.00 per month depending on the frequency of your payments,  can make a big difference to the balance in your loan account especially since some months have a cycle of five payment days. This means that you are always a little bit ahead of your mortgage payment. This may not seem like a great deal of money to be in front by, but after a year, this amount represents;

Paying $20.00 per week = an extra $1040.00 in your mortgage account

Paying $40.00 per week = an extra $1040.00 in your mortgage account

Paying $80.00 per month = an extra $960.00 in your mortgage account

By the time a year has passed, you may have accumulated one or even two months of loan repayments depending on your payment amount.

Reducing the risk of fees and charges

Most banks figure out for you a payment cycle that works and keeps you up to date in payments but sometimes the income someone receives may not exactly work out to coincide with the monthly mortgage payment and can result in a late payment. 

When a late payment is made and depending on your mortgage lender, this may result in extra charges, dishonour fees and other fees associated with the mortgage contract.  Prepaying your mortgage will guarantee that you receive none of these charges, you will always be in front and your next payment will already be waiting in your loan account for the bank to debit when it is due.

Reduced Interest

Interest is usually

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