Mortgage Question

[guyer6719]

So, you know how one extra mortgage payment a year is supposed to help you pay off early and save on interest? How should this payment be made? Should I instruct the mortgage company to apply that extra payment to principal only, or just send the payment in and have them apply it like any other payment?

[thomassl]

You can pay off your 30-year mortgage in half the time without refinancing by making extra principal payments. On the first of the month when you write your regular mortgage check, write a second check for the 'principal only' portion of the next month's payment. You can get more information from a book called, "Wealth Without Risk" by Charles Givens. I'm sure you can find it at the library.

[deltadawn]

There a quite a few amorization mortgage schedules on the internet. They will calculate different scenerios allowing you to see the difference if you pay 50 a month toward principle or 200.

These sites will also calculate how many years it will take to pay off and shows exactly how many years you can take off.

When you see the calculations in black and white, it's mind boggling.

[2ndTimeAround]

.....one extra mortgage payment a year?

.....the mortgage company to apply that extra payment to principal only, or just send the payment in and have them apply it like any other payment?

guyer

Understand the interest that is charged for doing the loan, most of it is applied the first few years before you start paying down your principle.

On a 30 year mortgage - with you making one extra payment (from the start of the loan), will knock off 7 years off your mortgage. A 20 year loan - one extra payment reduces your term to around 16 years. On a 15 year loan, one extra payment a year will reduce the term to 12 and a half years. If you are already into to the loan a few years, you cannot expect the same results if you start now.

Making extra payments into your longer will cause your credit score to go up. This happened to me - back in 2002 refinanced into a 20 year after we consolidated all our bills. We applied all our saves back into the loan. For the 1st year was sending an extra $1000 per month. My credit risen into the high 700's, almost a member of the 800 club....

In five years of send more each month, plus putting tax returns into our mortgage. we have knocked of more than seven years off our loan. Expect our first mortgage to be paid off with eight years...... (We also have a 2nd mortgage - but that's another story).

As for the answer to your second question - all banks are different. Some may allow you to set up payments to be withdrawn from your account. You might also check if your bank can send your payments out to your mortgage company (Bank of America does).

I use to work for a mortgage company, where we sold the Bi Weekly savings program for $500 a pop. Actually it is so simple, you can do it on our own.....

...

....:)

[guyer6719]

Cool! I'm gonna start as soon as I can.

[melisadawn]

I send the payment and x-tra all on 1 check. But my mortgage co sends a bill every month and details where previous payment went. And on the stub I send in It has how you are applying payment

i.e.

mortgage payment

additional escrow

additional interest

additional principal

For ours we have a 60K loan. Payments are 548$ a month including taxes-pmi-ins. For 2 yrs I have always paid 600$ Except one time I had to pay min. Not sure how much it will help us but I just put it in my head that housepayment is actually 600 not 548$ and try to trick myself LOL