First mortgage payment due soon...any advocates for paying extra ??

[buyhouse36]

I have read all the pro and cons about if it makes financial sense to pay off mortgage early. I have also read about the many different ways to accelerate pay off. They say the earlier you start the better the returns. We only put down 10% so I am eager to get rid of PMI. So I think I want to follow one of the accelerated programs at least for a time. Any suggestions out there for the best method to use?

[ezdriver]

If your primary motivation is to remove PMI, what typ of mortgage do you have? 

Accelerating principal reduction is accomplished by simply making adiitional payments, as often as you can/wish, and instructing the mortgage lender to apply those payment to principal reduction. How fast you pay down your principal depends on your cash availability.

[LieslMet]

Until you figure out what you want to do, pay at least an additional $200 to principal every month. That would cut more than 10 years from a traditional, 30-year mortgage for $150K. 

$300 would cut it by 13 years.

$400 would take you to paying it off in just under 15 years.

$500 would make it, effectively, a 13-year mortgage.
$1000 would have the house paid off in 8.5 years. How fun is that?

Bankrate has a great calculator/amortization table for this: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx?MSA=8160&MSA=8160&MSA=8160&MS...

[buyhouse36]

I have a conventional loan. I read a suggestion to pay the next months principal In addition to your regular payment. That cuts a 30 year mortgage in half. But the payments will get high.

[LieslMet]

The beauty of the calculator I linked (there are others, I'm sure, but that and the snowballing feature on whatsthecost.com are what I always use) is that there's no "I hear 'blahblahblah'"... plug in the numbers and see what works for you. Play with different monthly amounts until the time is cut in half.

[DallasLoanGuy]

has nothing to do with next month next month's principle.......  it simply boils down to extra principle reduction.

ANY extra payment is a good thing

[buyhouse36]

Thanks for all the input and the calculator was very helpful. After playing with the numbers, I will be sending a separate check every month for $100. That will leave funds to replenish my savings and still knock off about 10 years off my mortgage. Seems to be the most balanced approach.

[taggl00]

what you were told about the next months principle is correct.....do NOT just send extra principle and check the box that says apply to principle, the mortgage company will simply apply it to the BACK end of your mortgage....you want it applied to the following months principle, you will need to include a letter stating to apply it to the next months payment, or payment #2. then the second month send in your regular payment and an extra principle payment and label it payment #3 and 4......this will dramatically payoff your loan quicker and save you thousands in interest.....it is easiest to do it in the beginning as your principle is very low.....if you just double the first 3 payments, you will rocket yourself into year 2 of payments

[BaileyMae]

Is this something one should consider doing if you don't intend to stay in the house of the entire life of the loan?

[buyhouse36]

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@taggl00 wrote:

what you were told about the next months principle is correct.....do NOT just send extra principle and check the box that says apply to principle, the mortgage company will simply apply it to the BACK end of your mortgage....you want it applied to the following months principle, you will need to include a letter stating to apply it to the next months payment, or payment #2. then the second month send in your regular payment and an extra principle payment and label it payment #3 and 4......this will dramatically payoff your loan quicker and save you thousands in interest.....it is easiest to do it in the beginning as your principle is very low.....if you just double the first 3 payments, you will rocket yourself into year 2 of payments

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I was told to send a separate check stating "principal only"....is that enough???