# Real estate: extra payments to interest? **URL:** \ **Category:** Factual Questions\ **Created:** [October 9, 2006, 5:29am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784 "2006-10-09T05:29:56Z")\ **Posts on this page:** 14\ **Page:** 2
**Author:** ![Johnny\_L.A](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnny_l.a/32/1084_2.png) [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)\ **Post date:** [October 10, 2006, 12:50am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/21 "2006-10-10T00:50:36Z")
[QUOTE=elfbabe] Principal, not principle. [/QUOTE] I stand corrected. > [@David Simmons](#): > > ou might check and make sure that the bank, or whatever, is handling this right. > > I made extra, principal only payments filling out a little form at the local bank each time. I signed up to make extra payments to principal online. The had a box to indicate ‘extra payment to principal’. The extra funds show as ‘Principal Payment’ on my statement. ---
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [October 10, 2006, 1:29am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/22 "2006-10-10T01:29:46Z")
[QUOTE=Johnny L.A.] I stand corrected. I signed up to make extra payments to principal online. The had a box to indicate ‘extra payment to principal’. The extra funds show as ‘Principal Payment’ on my statement. [/QUOTE] Good. You get instant feedback from the statement if the loan is with the same place you bank. In my case it was a differnt bank and they didn’t say squat and it didn’t occur to me to check on the closely. This was like 30 years ago when I still thought bankers knew what they are doing. ---
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [October 10, 2006, 1:33am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/23 "2006-10-10T01:33:39Z")
By the way, at that time my bank was BofA and I was after a VA guaranteed loan. When I went to the local BofA manager about it he looked down his nose and said, “BofA doesn’t handle VA loans.” I haven’t been back to BofA since. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [October 10, 2006, 1:56am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/24 "2006-10-10T01:56:11Z")
**Johnny L.A.** , is there a chance for a clarification from your cow-orker on this? ---
**Author:** ![Johnny\_L.A](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnny_l.a/32/1084_2.png) [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)\ **Post date:** [October 10, 2006, 11:43am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/25 "2006-10-10T11:43:55Z")
She works in another department, so I seldom see her nowadays. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [October 10, 2006, 1:11pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/26 "2006-10-10T13:11:55Z")
One reason I can think of prepaying the interest (and escrow) is if you are going to be out of the area and unable to make payments for several months and want to prepay, perhaps hiking the AT end to end, a stay on the International Space Station, submariene service or other such thing. ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [October 10, 2006, 9:08pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/27 "2006-10-10T21:08:01Z")
I sent out 28 mortgage payments today, and each one had a section on the statement for additional payments to the principle or to the escrow. Nothing about extra interest payments. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [October 11, 2006, 4:00am UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/28 "2006-10-11T04:00:19Z")
Hmmmmmm. Annie X-Mas has more houses than that Enron CEO had before he got sued… ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [October 11, 2006, 2:16pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/29 "2006-10-11T14:16:22Z")
All of my mortgages have always automatically credited payments to principal rather than interest without any further action on my part. Since I’ve always paid online, I’ve never had to submit anything like a payment stub to make an election. My first car loan back in 1990 or so, though, did automatically apply payments to interest. My subsequent statements would always indicate a reduced payment whenever I paid extra. I wasn’t smart enough to know any better back then, though. ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [October 11, 2006, 7:24pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/30 "2006-10-11T19:24:53Z")
[QUOTE=Balthisar] My first car loan back in 1990 or so, though, did automatically apply payments to interest. My subsequent statements would always indicate a reduced payment whenever I paid extra. I wasn’t smart enough to know any better back then, though. [/QUOTE] So you’re saying that, for example if your payment was supposed to be $250, and you paid $300 one month, your next month’s statement (you get a bill each month for a car loan?) would say you owed $200? If that’s the case, I don’t understand the “payment to interest” terminology. Actually, in any case, I can’t comprehend what that would mean. ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [October 12, 2006, 12:49pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/31 "2006-10-12T12:49:55Z")
[QUOTE=Mr. Slant] Hmmmmmm. Annie X-Mas has more houses than that Enron CEO had before he got sued… [/QUOTE] Sadly, they all belonged to other people. I work in rental property management, and we handle all the bills. ---
**Author:** ![Johnny\_L.A](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnny_l.a/32/1084_2.png) [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)\ **Post date:** [October 12, 2006, 1:13pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/32 "2006-10-12T13:13:15Z")
[QUOTE=CurtC] If that’s the case, I don’t understand the “payment to interest” terminology. Actually, in any case, I can’t comprehend what that would mean. [/QUOTE] I’m no real estate expert (obviously). I think the rationale may be that ‘interest is paid first’. I don’t know if that is true, but it’s something that I’ve heard. I haven’t looked to closely at my mortgage payments. Some of the payment goes to property taxes and some goes to homeowner’s insurance. I’m guessing that from the actual mortgage payment, 20% or 25% goes to principal and the rest goes to interest. I think that the FOAF’s logic may go thusly: ‘If I make extra interest payments, then I’ll pay off the interest more quickly and I’ll be able to pay the principal sooner.’ But since interest is based on the principal, it makes more sense to me (a non-expert) to pay more to the principal and reduce the total interest being charged. ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [October 12, 2006, 2:05pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/33 "2006-10-12T14:05:07Z")
[QUOTE=CurtC] So you’re saying that, for example if your payment was supposed to be $250, and you paid $300 one month, your next month’s statement (you get a bill each month for a car loan?) would say you owed $200? If that’s the case, I don’t understand the “payment to interest” terminology. Actually, in any case, I can’t comprehend what that would mean. [/QUOTE] Yeah, that describes it correctly - in my case it was $150 instead of $121.33 (I always remember my very first car payment – yay). I only said “payment to interest” because someone else mentioned that as a sign that you’re paying down interest instead of principal. I’d never thought of it in those terms. In my mind at that time I was just considering it as an advance payment on next month’s bill. If I only knew then what I know now. :smack: ---
**Author:** ![Philster](https://avatars.discourse-cdn.com/v4/letter/p/13edae/32.png) [@Philster](https://boards.straightdope.com/u/Philster)\ **Post date:** [October 12, 2006, 2:33pm UTC](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784/34 "2006-10-12T14:33:24Z")
[QUOTE=CurtC] So you’re saying that, for example if your payment was supposed to be $250, and you paid $300 one month, your next month’s statement (you get a bill each month for a car loan?) would say you owed $200? If that’s the case, I don’t understand the “payment to interest” terminology. Actually, in any case, I can’t comprehend what that would mean. [/QUOTE] My student loan works like that. If you are disciplined and pay the 300 no matter what, the principal goes down, the lenght of the loan is shortened and you are happy. If you pay the reduced payment, the length of the loan stays the same (or very close to it). People who auot-pay bi-weekly on their mortgages are told by the mtg company that this is great, because you make the equivalent of 13 full payment per year (26 x.5), instead of 12 monthyl payments. However, from what I understand, you are just making another interest and principal payment. You’d be better off paying 12 regular interest and principal payments and one extra FULL principall payment. [Previous page](https://boards.straightdope.com/t/real-estate-extra-payments-to-interest/375784.md?page=1)