So the interest rate on my mortgage is 5.5% fixed. $100 in a savings account is not going to pay 5.5% interest… so I get more if I put it there. Lets say an extra $10… even tho it is a small amount it is nice to see the principle come down. If I owe an uneven amount, I might pay the cents to round it off… say the balance is xxxx.75$ I will pay the 75 cents just because.
Very smart
So I been studying this. Take your mortgage rate, 5.5%, divide by 12 = .45833 now multiply that by the amount you owe on your mortgage at this hour- that will tell you the interest you will pay on your next payment. HINT! If you are going to pay toward the principle -do so toward the end of the month. Lets say I am going to pay $20 on the principle- it has more punch paying on the 30th than on the 1st. So keep that in mind. On the one hand, I want to pay it off, on the other hand, the money is debased… so 2019 dollar has less value than 2007 dollars (when I bought the place)
The system makes the most money the first year that you finance your house. The system counts on us to move every 4-5 years. So if you live in the same house 13 years, you deny the system the money it wanted in various fees. You are building a future for YOU not the financial industry.
For what it's worth, I was told (over a decade ago so I may not have the details right) that if you make 1 extra monthly payment a year, you'll knock off 10 years of a 30 year mortgage. I took that amount and divided by 12 and tried to add on each month to go towards the principal.
I've also heard if you can split your monthly payment into 2 payments (pay 1/2, 2 weeks early; other 1/2 on time), you may pay less in interest (charged daily). This method, at least with car loans, may depend on the type of loan you have and should be set up with automatic payments to make sure you aren't late sending a payment. (Some loans have penalties for early payoffs, but these are non-standard and you would probably already know if that's what you have.)
It is good to be thinking on this and forming a plan. Very cool.
Try saving up a lump sum then Recast your loan instead. Paying the principle early does not affect the amortization schedule.
This is a fun calculator to see your options and savings for payng off quicker https://www.daveramsey.com/mortgage-calculator
I am less than a year away from paying off a 112000. mortgage and it will be the 1st home I've owned outright. I started with a 30yr mortgage but refi'd to a 20yr a few years later. I made extra payments when I could and knocked a few years off.
Sorry wrong calculator, this is the payoff version https://www.daveramsey.com/mortgage-payoff-calculator
You can view your interest savings and calculate how soon payoff happens with additional payments. It's inspiring to play with:)
