@Lel wrote:
@Anonymous wrote:I'm starting to make additional principal payments each month with my regular monthly payment.
How do I know if it being applied correctly to my outstanding loan?
My amortization schedule would be changing month-by-month. My monthly payment gets adjusted on a yearly basis now due to changes (usually increases!) in property and school taxes.
Thanks!
forthill
If you receive monthly statements, it might show your current loan balance and how much of your subsequent payment will be applied to interest and how much to principal. When you get your next statement, your updated loan balance should go down by an amount equal to the regular prinicipal payment plus your extra principal payment.
If your statements are short on this information, then you could use the bankrate.com mortgage calculator to create an amortization schedule that includes regular extra payments. This particular calculator does a pretty nice job of breaking down your monthly payment into interest and principal and showing the ending principal balance after each payment. You should be able to match up the amounts from the calculator with the amounts on your statements.
If, however, the amount of extra payment you make is variable from month to month, then you won't be able to create a comprehensive amortization schedule with the the bankrate.com calculator.
In general, you can probably be reassured that your extra payment is going to pay off the principal. As far as I am aware, all reputable lenders apply the extra payment to principal. But it's nice to have some proof of this.
Yes, bankrate.com has some excellent calculators, and as noted your monthly statements should reflect the current principal. In addition, you should check your lender's website, as that may have some useful features. My mortgage is one of the many that Washington Mutual sold to Wells Fargo at the height of the bubble when they wanted more than the 5.875% they were getting from me, and not only can I pull up my recent transaction history on the Wells Fargo website, but Wells Fargo even captured my payment history from when I was sending the payments to WaMu! So I can see when they got each payment, how it broke down into Interest/Principal/Escrow, and the new principal balance after each payment.
If you want to play around with more complicated prepayment scenarios, it's actually pretty simple to do with a spreadsheet program, and the Mortgage Professor has some excellent template files here:
http://mtgprofessor.com/spreadsheets.htm
He also has some web-based calculators similar to those on bankrate.com but I prefer using a spreadsheet because it's more flexible so I can modify it in various ways. One specific modification I made because I'm a little compulsive and like numbers to agree exactly: I do all my calculations in pennies with lots of INT(0.5+K37) stuff then divide by 100 to handle the inevitable roundoff errors and get exact agreement to the penny with the bank's numbers. Since the biggest errors corrected in this manner were about seven cents there is probably no practical reason for doing it the way I do