re: Do you pay extra on your Mortgage every month?

You double the principle if you want to cut the note in half.

$1650, pay $2200. 15 year mortgage

quote:

---

We currently are not putting extra toward it. $1089/month ($852/mo is Mortgage)

---

I’m in nearly the same boat. $986 a month including escrow. I backed out the escrow, divided by 12 and add that to my payment each month. It’s minimal dollars that I don’t miss but they add up BIG long term.

I don't pay any of my loans off early unless I have another financial incentive too, for a couple reasons.

First of all, inflation. A dollar today is worth more than a dollar a year from now. If inflation is 2% a $1000 payment today is $1k dollars, but that same payment in 5 years is about $906 in today's money. In ten years that payment is worth $820 today, in 20 $673. In 30 it's down to $552.

Secondly rates are low enough to where I can make more by throwing it in the market than I can saving on house interest. That may not be the case in five or ten years, but right now the math favors throwing extra money in the market.

There are a few other arguments, namely taxes, but they really aren't as important as those two. Provided you don't have PMI paying down your mortgage is a psychological argument rather a financial one. Peace of mind. Nothing wrong with that, but I'm more of a numbers guy.

I pay extra on primary home, but not rental right now.

Currently paying about double the P/I payment each month. Once the rental account has a reserve built up next year, any extra from it will be added on. Goal is to have both paid off before my son starts college in about 10 years.

quote:

---

How do you know when you've reached PMI?

---

You have to have PMI if you have less than 20% equity in the home. You should be able to check your balance by looking at your statements. If it's less than 80% of the closing price you should be able to refinance to get out of PMI.

Now, most places will require you to get an appraisal before refinancing. They'll look at how much you owe vs what the home is worth now. So if the house has appreciated you can potentially get out before having paid 20% of the closing price. Alternatively you may have to pay more if the house has depreciated.


Now, if you want to do the math instead of relying on your statements you can calculate how much each payment pays down your principal. Warning, it does take a little math.

First figure out your current balance. Next multiple it by your rate divided by 12(for 12 months). That is how much interest you're paying on your next payment. Now take the P&I portion of your mortgage payment (should be in your statements) and subtract your interest from your P&I payment. That number is what pays down your loan. This number goes up every payment, so more of your principal is getting paid for as time goes on.

For example, let's say you have a loan for a $100,000 with a 5% rate. This will give you roughly a $820 payment.

For your first payment:

Interest = .05/12*100000 = $416.67

Principal payment = 820 - 416.67 = 403.33

Remaining balance = 100,000 - 403.33 =
$99,596.67

And then for your second payment:

Interest =.05/12 * 99,596.67 = $414.99

Principal = 820 - 414.99 = $405.01

Remaining balance = 99,596.67 - 405.01 = $99191.66

And so on and so forth until the balance is paid for.

I did and paid my first house off in 16 years.

bookmarked

quote:

---

That's my whole point. I hear over and over "pay off your mortgage so you no longer have that payment". Well that's really not true at all. These are all very rough figures, but 1/3 of your "mortgage" payment is insurance and taxes which you will have if your mortgage to your bank is paid off or not.

The other 1/3 is principle which is basically you simply putting cash deposit in the bank

---

It's even worse than you describe. You don't realize equity until you sell the property or borrow it back from the bank. Equity feels good, but it's largely illiquid.