calculating the effective interest rate of accelerated mortgage payments

[Anonymous]

Thank you iv, and Appleman, for these explanations.

This is a useful formulation for me to make the decision: "Paying $202.04 extra each month for the flexibility of being able to skip the "extra" payments."

And this one: "Skipping the extra payments in just the first six months of the loan would increase your total interest paid by $7,819.47."

[StartingOver10]

The argument for taking the 30 year loan and paying it off early is that if there is a cash flow issue, you have your fall back position of only paying the 30 year payment.

Also, if the cash flow issue lasts for several months you don't need to refi to get to a lower payment. Presumably if you are having a substantial cash flow issue you wouldn't be in a position to refi anyway. It really is a matter of the type of income you generate.

If your income is the type of income that is steady then it is easier to just plug and play (so to speak) - get your 15 year mortgage and make those payments. However, if your income is more of the self employment type income, then it is a little more prudent to get the 30 year and acclerate your payments. JMO

[Appleman]

The good news is that we are all giving similar and IMO good advice. It sounds like monthly cash flow is more of a concern and if so the 30 year is likely the better option.

Accelerate those payments early. Think about how much an extra $1,500 prinicpal paid on day one would save over the life of the loan.

[Anonymous]

Thanks again to all of you!

Can anyone recommend a good online mortgage rate calculator for doing these various scenarios?

[iv]

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@Anonymous wrote:

Thanks again to all of you!

Can anyone recommend a good online mortgage rate calculator for doing these various scenarios?

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There's a fairly well-done Excel template at http://www.vertex42.com/Calculators/home-mortgage-calculator.html