Paying extra to loan's principal

[Barbie777]

I need help deciding on how much extra to pay each month towards the principal of our mortgage. We have a 30year loan @4.6interest rate, fixed. I would like to pay off the mortgage sooner than 30years. We are paying $1,151.54 monthly on a $190,000 mortgage.  How much extra for a 15year payoff? Or a 10year payoff? I am curious!

[IOBA]

I dont' have a ready calculator handy, but this is what I would do...

Print out an amortized table of your loan.   Any extra principle payments you make (if they are credited properly) will chip away at the back end, the last payment, payment #360.  

So say your last payment is $1400 principle, $12 interest, and the difference is escrow (I am making up these numbers).   

December 2011 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $1200)

January 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $1000)

February 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $800)

March 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $600)

April 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $400)

May 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $200)

June 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $0, the escrow payment is gone, the interest payment of $12 goes away)

Now you have only 359 payments (minus what you have already done).

So now say your 359th payment is $1150 principle, $37 interest -- again making up numbers.

July 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $950)

August 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $750)

September 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $550)

October 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $350)

November 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $150)

December 2012 - extra $200 on principle (last payment is reduced by $200 dollars, new principle is $0, and $50 reduction on payment #358)

It starts to snowball pretty quickly.

If we ever get our house, I plan to pay extra on the principle every payday.   The "tax savings" aren't worth the stress of a mortgage for me.

[Barbie777]

I get the idea of what you are saying. My principal and Intrest is $976.87.  My escrow is $174.67. We want to pay an extra $450 monthly towards the principal. Thanks

[IOBA]

If you print out the amortization table, and apply the examples I used (with your real numbers), you can see how fast you can pay off the mortgage.   

I strongly encourage you to follow up with the bank and even check online, to make sure your extra $450 a month is being applied as a principle ONLY payment.   Sometimes the bank keys it in as an advance payment or as an extra escrow payment....  

Have fun paying off your mortgage early!   That will be exciting!!

[Barbie777]

Yes, I am watching my account online very closely to make sure they apply extra payments to principal. Thanks1

[Anonymous]

Assuming you started paying the loan Dec 1 2011

250 a month makes the payoff Sep 1 2031

350 a month makes the payoff may 1 2029

450 a month makes the payoff Aug 1 2027

550 a month makes the payoff feb 1 2026

This will give you an idea the difference paying each amount extra can make.

Bankrate.com has a mortgage calculator on their website for free  which includes an amortization table and the ability to factor in multiple

types of exta payments.

Mike

[Barbie777]

Wow, what a difference paying more makes! I will check the bank.rate site out.

[Booner72]

I did a bunch of research when in the mail I got an offer for biweekly payments.  WHICH IS A SCAM - I found out from everyone here - You can make biweekly payments on your own.  This would have made my loan paid off in 19 years instead of 30.  I only get paid once a month.  So I can't do biweekly.  But what I can do, is send in enough extra each month to total up one mortgage payment for the year.  it's really not that much extra at all and 11 years is a HUGE amount of time to not pay a mortgage.

For my 146K loan, I have to scrap up less than 800 a year.  Pretty sweet how this works, I agree with you.

If you did just open your loan, I'd watch in the mail for this kind of thing, too.

[Barbie777]

You are right, why pay someone to do something that you can legally do yourself?  My mortgage co., Wells Fargo sent me a letter stating that we can make extra payments towards the principal.  Thanks for the information about the bi-weekly scam!

[Booner72]

Wells bought my loan, too.  They have a pretty handy online payment system, and I'm happy with the customer service so far since they are open until 10:00PM EVERY NIGHT!  I called to have them pay my taxes when the tax bill came and they did right away.