I took out a home 30 year home loan of 177,397.00 @ 4.375% in June of 2011. I have mostly made the minimum payment and now have a principal balance of 165,224.40 (48k paid including insurance, balance down 12k - Yah interest!) with almost 26 years remaining. If I want to have my mortgage paid off in 15 years (say May of 2030) from today to correspond with my oldest starting college,
How much extra would I have to pay per month towards principal?
How much if I was to make an additional principal payment every other week (i.e, 26 times a year) when I get paid?
What if I made this is a singular annual payment maybe to correspond with a work bonus or tax returns?
I am admittedley embarrassed that I can’t easily calculate this myself. I found one of the mortage payment calculators online and kept adding principal until it would knock off 11 years (26 years remaining - 11 years shorted = 15 years) and it appeared that it would be about $340.
I am really interested in the above answers, but for the sake of teaching me to fish suppose I wanted to change this same calculation to 10 years or 5 years or 20 years? The basic problem is:
I currently owe ‘X’ dollars at interest rate ‘i’, how much extra principal ‘p’ do I need to make (monthly, bi-monthly, annually) to pay off my mortgage in ‘y’ years given that I am ‘y1’ years into my mortage and currently owe ‘p1’
I’m sure there are amortization calculators online that you could access. A simpler way would simply be to add on, say, $100 a month to the principal payment, and see what happens.
If you really think you could pay off the home in 15 years, you should look into refinancing with a 15 year fixed loan and lowering your interest rate.
I have considered refinancing, but while refinancing to a lower rate would be nice, lowering from a 4.375% to maybe 3.8% wouldn’t be worth closing costs + being forced to pay it off in 15 years versus optional extra payments. Basically 50 basis points in reduced rate isn’t worth the reduced flexibility.
Many mortgages have the option to pay down a part of the principle once a year on the anniversary. If yours has this, then this may also be an option instead of trying to fiddle with payment terms.
Figure out what 1/12 of you payment is without interest or PMI (if aplicable), add that to each payment. Mortgatge will be paid of at least 7 years sooner.
My mortgage company allows me to pay one half of my monthly payment every two weeks, or one quarter my monthly payment every week. With 52 weeks in a year, either way means that I make 13 mortgage payments in a 12 month year. Over the long run, it cuts about a quarter of the time off of the length of the mortgage.
I know this doesn’t answer the original question, but I gauged a sort of convenience factor in the asking of the question, and it is a lot more convenient to pay one quarter of a mortgage payment a week, than to pay a lump monthly mortgage payment - even though it means I’m paying more each month. And, some mortgage companies offer this as an option with the automatic payments.
Some mortgages don’t allow you to do something like the biweekly schedule unless you set it up at the beginning - I found this out recently when I tried making two half-payments, and the bank didn’t consider that as a whole payment.
Fortunately they recategorized it but next month I will make sure to pay all on the same date.
I was trying to rejigger things because one paycheck comes in monthly, and the other comes in every 2 weeks. I was trying to pay half at the end of the month, and half every 4 weeks (which would gradually accelerate to an extra half payment a year). No dice.