The bottom line is, send in more than you're required to send in, if you can afford to do so. Borrowers deciding to take the plunge should stay clear of costly plans billed as alternatives to doing it on their own. Once enrolled, a person either mails biweekly payments to the company, or has them automatically deducted from an account. First, contact the mortgage company to find out how to ensure the money is allocated in the right place. Others may require a separate check each month.
Prepayment penalties can be another foul-up.
They can typically occur when a borrower refinances, but some can be activated if a person pays more than 20 percent of the loan's principal during any one year period early in the loan. The penalty can be as much as 6 month's interest on the amount paid that exceeds the lender's allowable prepayment. Prepaying isn't always your best bet. That return equals the mortgage interest rate, minus any benefit from the tax deduction you would have been entitled to because you paid that interest. That's less than the stock market's average return of 8 percent to 10 percent, and way below the numbers lately.