If you’re stuck between paying down the balance on the principal or escrow on your mortgage, always go with the principal first. By paying towards the principal on your mortgage, you’re actually paying on the existing debt, which brings you closer to owning your home.
On the other hand, escrow is essentially third-party funds to cover things like property taxes, homeowners’ insurance fees, and future interest, so if it is really bugging you this is another option.
But as we said, when you have to choose between paying the principal or escrow on your mortgage, always go Principal!
First and foremost, you can shorten the length of your mortgage term. This process can be expedited even further by making extra payments or going above the minimum required payment. This happens by minimizing potential interest.
Paying the principal first also increases your home’s equity. [Read more…]