The Importance of a Year-End Mortgage Review
As the calendar winds down, many people focus on closing out projects, preparing for tax season, and setting financial goals for the year ahead. One area that often gets overlooked—but can have a significant impact on long-term financial well-being—is a year-end mortgage review. Taking time to reassess your mortgage annually helps ensure you’re managing your largest debt strategically, taking advantage of opportunities, and preparing for any financial changes on the horizon.
Why a Year-End Review Matters
A mortgage isn’t a “set-it-and-forget-it” financial product. Market conditions change, personal finances evolve, and homeownership goals shift over time. Reviewing your mortgage at the end of the year helps you:
- Identify potential savings
You may uncover opportunities to refinance to a lower rate, shorten your loan term, or eliminate private mortgage insurance (PMI). - Plan for adjustments in income or expenses
Annual bonuses, salary changes, or large upcoming expenses can influence how you want to approach your mortgage payments. - Stay ahead of tax considerations
Reviewing interest paid, escrow balances, and potential deductions positions you well for tax season. - Align your mortgage with your long-term goals
Whether you’re planning renovations, considering a move, or preparing for retirement, your mortgage strategy should support your broader financial picture.
Key Components of a Year-End Mortgage Review
1. Review Your Current Mortgage Details
Start by gathering your loan documents and recent statements. Confirm:
- Current interest rate
- Remaining loan balance
- Loan term and time remaining
- Monthly payment amount and how much goes to principal vs. interest
- Whether you have an adjustable or fixed rate
- Escrow balances for taxes and insurance
This snapshot forms the foundation for any decisions you may make.
2. Evaluate Your Interest Rate and Refinancing Opportunities
Mortgage rates fluctuate frequently. Even a modest reduction in rate can produce meaningful long-term savings or lower monthly payments. Consider whether refinancing could:
- Reduce your interest rate
- Shorten your loan term (e.g., 30-year to 15-year)
- Move you from an adjustable-rate mortgage (ARM) to a fixed rate
- Remove PMI if your home value has increased
A loan officer can help run the numbers to see if refinancing aligns with your financial goals.
3. Assess Your Home Equity
Your equity—the difference between your home’s value and what you owe—can change significantly year-to-year. Look at:
- Estimated home value (recent appraisals, market comparisons)
- Remaining mortgage balance
- Opportunities to tap equity for planned home improvements or debt consolidation
Growing equity may also make you eligible to remove PMI, reducing your monthly payment.
4. Check Your Escrow Account
Year-end is the perfect time to confirm your escrow account is properly funded. Review:
- Taxes and insurance paid during the year
- Any shortages or surpluses
- Whether your monthly escrow payment will adjust next year
Catching discrepancies early can help avoid surprises.
5. Evaluate Your Payment Strategy
The way you pay your mortgage affects both cash flow and long-term savings. Consider:
- Increasing principal payments
- Making one extra payment per year
- Switching to bi-weekly payments
- Redirecting extra cash flow toward other goals instead
Align your payment strategy with your broader financial plan for the coming year.
6. Take Stock of Your Credit and Financial Changes
Improved credit standing may open doors to better mortgage terms. Review:
- Credit score changes over the past year
- Debt levels and income changes
- Budget adjustments for the coming year
This ensures your mortgage remains appropriately structured for your financial reality.
Setting Goals for the New Year
Once you’ve completed your review, choose one or two action steps for the coming year:
- Refinance or consolidate debt using home equity
- Reassess homeowners insurance
- Add extra principal payments
- Start planning a future home purchase
- Prepare for major life events like retirement, relocation, or home renovations
A clear plan helps your mortgage work for you—not the other way around.
Conclusion
A year-end mortgage review is a simple yet powerful way to stay in control of your largest financial obligation. By taking just a small amount of time to check in on your interest rate, equity, payment strategy, and long-term goals, you can uncover opportunities to save money, reduce stress, and strengthen your overall financial picture for the new year.
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.