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re: Another question regarding paying down your mortgage...
Posted on 10/5/12 at 9:29 am to OnTheBrink
Posted on 10/5/12 at 9:29 am to OnTheBrink
Does that $1100 include taxes and insurance payments? If it includes taxes and insurance, your principal and interest payments from that $1100 are actually less.
Mortgages are also front end heavy on the interest, and paying more towards the principal of the mortgage only shortens the number of payments you have. It does not alter the amount of interest that is taken from your monthly payment each month as this is all pre-calculated, and the amount of interest you are paying in that last year on a 30 year mortgage is hardly anything. For example, say you took a 30 year mortgage at 5% on $100K. In the last year of that loan, you are only paying $171 in interest.
If you have Excel, there is a template for Mortgage Loan that you can plug numbers in and see what actual principal and interest payments are, and you can also add additional principal payments into the formula to see how it affects when the loan is paid off.
Mortgages are also front end heavy on the interest, and paying more towards the principal of the mortgage only shortens the number of payments you have. It does not alter the amount of interest that is taken from your monthly payment each month as this is all pre-calculated, and the amount of interest you are paying in that last year on a 30 year mortgage is hardly anything. For example, say you took a 30 year mortgage at 5% on $100K. In the last year of that loan, you are only paying $171 in interest.
If you have Excel, there is a template for Mortgage Loan that you can plug numbers in and see what actual principal and interest payments are, and you can also add additional principal payments into the formula to see how it affects when the loan is paid off.
2
Posted on 10/5/12 at 9:37 am to jguidroz
quote:
Does that $1100 include taxes and insurance payments?
Yes. I am only paying about $230 in principal now, per $1,100 mortgage payment.
My point was the extra $1,000 I put toward the principal knocked off 4 months in payments, seeing as how I am still early in my loan, saving $4,400 over the next 30 years.
quote:
TheHiddenFlask
Yeah, count me in those who miss that point. I have a hard time understanding inflation/deflation.
Posted on 10/5/12 at 11:51 am to jguidroz
quote:
No, just no.
Really?
quote:
It does not alter the amount of interest that is taken from your monthly payment each month as this is all pre-calculated
For example:
$100,000 mortgage
By the time 30 years is up, assuming no extra payments, you pay around $200,000, principal and interest.
You're saying if you pay extra each month and pay the note off in 15 years, you will still end up paying the $100,000 interest? I did not think that was correct. If so, what would be the purpose of paying it off early?
*Numbers are not accurate, just used for sake of example.*
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