Making the minimum loan payments (while putting extra money in a low interest-bearing savings account) or keeping the same policy for years (without shopping around for more competitive rates) is an easy way for homeowners to save less and spend more than they should.
The new decade is the perfect time to learn some easy, new steps that can get you closer to your financial goals in 2020. Here are 5 resolutions for 2020:
Resolution 1: Pay down principal
Basic economics dictate that borrowers should pay off their debts with the highest interest rates first. Since mortgages today generally have low interest rates, folks with more expensive debt should tackle those big-ticket loans (like credit cards) first and then hit their mortgage.
However, if you have private mortgage insurance, or PMI, you’ll want to pay down your balance as quickly as possible to the 80 percent equity level to eliminate that monthly PMI payment.
When you make extra payments toward your principal, make sure your lender knows this money should go toward your principal, otherwise they might apply it to your next month’s mortgage payment
Some lenders have options to earmark extra funds in their payment system. If you’re unsure, check with them on how you should proceed.