Before computing if you should pay off your home loan, it is important to remember that if you have debts that have much higher interest rates, it would make sense to pay them off first. Financial experts agree that borrowers should focus first on paying off car loans, credit cards and student loans.
They also agree that it is advisable to set aside some of the money for retirement accounts, such as IRAs and 401(k), before making additional payments for the mortgage. Failure to do so would mean that they are not taking advantage of the substantial returns and tax benefits offered by these accounts.
Then, if you still have the funds for paying off your home loan, you can enroll in the acceleration program of your lender. They can make the computations for you on how much you will be paying every month for a particular target date or you can specify the monthly payment and they will calculate how long it would take you to completely pay the loan. However, the banks normally charge a one-time fee for these programs.
You can save by doing the computations yourself by utilizing the calculators that are available online, such as those in www.bankrate.com, www.interest.com and www.vertex24.com. However, do not forget to inform the lender that the extra amount that you are paying will have to be applied to the principal.
If you pay online, you may need to send your lender an email or call their customer service to ensure that the payment is properly applied. If not, it may just be treated as an advance payment for the following month.