Ziay!

Bob B

...one month off the end of the loan? I just started my payments in Dec of '07, and have been making double and triple principal payments every month. I've been keeping track with the online amortization schedule which updates after each payment. The extra payments only seem to be taking one month of the end of the loan. I always heard that paying extra take "months" off your loan which makes since to me... less principal = less interest over the life of the loan = months of savings. Can someone explain it to me in more detail...Thanks.
It's a 20 year loan, there is no early repayment penalty, and I'm 100% sure the extra payments are going to principal.

efflandt

There is a difference between paying double the principal and paying double the payment. Initial payments are mostly interest, so paying double the principal would initially just take small bites out of your loan.

If you could actually afford to make double complete payments, that would end your loan in less than half of the 20 years (subtracting more than one month per extra early payment) since your principal and resulting interest would decrease much more rapidly.

mpc_rod

There are many scenarios with the extra payment option. Some says pay "X" amount each month and it will be paid off "X" amount of years early. Some say make extra payments each year. and some are progressive. Nonetheless, you can also take the extra money you would have payed on the mortgage and invest into something else. and get a better rate of return. For instance, say your mortgage is 1000 a month. say you paid 2 extra months a year. and it saved you 60,000 (very rough estimate) total in 30 yrs. Now you might have been able to invest that 2000 a year (or 166 a month) into something else and thus made more money for your investment. you also have to look at tax write off, etc etc etc..Trading Apples for Oranges. Good Luck!

SexyArmyWife

what might be happening is that they are applying your extra payments to the interest, even if you think you are putting it towards the principal. make sure you talk to the bank where you got your loan, and tell them that any extra payments, go directly to the principal.

as long as you have that 30 yr mortgage, you will pay for that many yrs in interest.

found that out with student loans! lol.

David B

you have to ensure that 1. the extra payments are going only to principal and 2. that you dont have an early repayment clause. That said its too soon to see a significant impact on a 30 year fixed. If you question the calculations call them.