The tax refund most Americans received may already be spent, since many families used it to pay bills or buy longed for items. But for those still deciding what they want to do with it, think about paying some of your mortgage down, a concept known as prepayment.

This is a fairly simple procedure that can save you thousands of dollars over the life of the mortgage.

If you want to use the rebate to invest in your future, you could not find a better way, in place of investing in stocks and bonds. Right now, the stock market is a little scary for most people to start to invest in, but your home may turn out to be the best investment of your life.

Using any large amount you get, or even small amounts every month, will cut down your loan balance and save you a lot over the long run.

But even if you have already spent the tax refund, or don’t have a lump sum to give to prepayment of your mortgage, there are other ways to reduce this debt more quickly and save overall while you do so. You may not even have to change your everyday spending habits to any large amount.

You can add a small amount each month to your usual mortgage payment, which will be allocated to the interest of the mortgage, reducing the outstanding balance more quickly. Because of the way interest is calculated on accrued balances, this can save a lot of money over time. Not only will you lower the total interest charges, but you will pay down the principal earlier as well if you stuck to this program.

Another way to reducing your home loan, and this does not involve sending any additional funds to the bank, is to pay it more often. You can either ask for a bi-monthly payment schedule, or you can simply send one half of the mortgage at the middle of each month and then pay the second half of the mortgage on the first of the month as usual. Your monthly payment will be the same, but you will be lowering the loan more quickly with this extra payment.

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Tags: finance, Home Loans, insurance, mortgage, Mortgages

This entry was posted on Tuesday, February 23rd, 2010 at 2:12 pm and is filed under Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.