Paying extra on mortgage?

iVillage Member
Registered: 09-29-2000
Paying extra on mortgage?
19
Sun, 02-05-2006 - 4:08pm

I was just wondering how many people are paying extra on their mortgage even though they are still paying on debt? You hear that if you pay an extra payment a year it takes off something like 7 years of payments. Is that recommended? I will admit, I pay a little over $100 extra each month on my mortgage. I used to just round up to the nearest $100, but now my payment is something like $1496, so it wouldn't be much. So, I have been paying $1600 a month.

What's everyones take on this? Really curious of everyones responses!

Donna

Pages

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Sun, 02-05-2006 - 5:08pm

Well, here at our house, we don't pay extra on our mortgage for a couple of reasons.

All my best,
Danni

Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Sun, 02-05-2006 - 6:31pm

I only round up to make it an even number which is $1.77 added.

iVillage Member
Registered: 12-12-2004
Sun, 02-05-2006 - 8:05pm
Hi, JM. Well, DH and I want to get ahead on this mortgage thing. It is the biggest expense for us. At the rate we are going, we'll be 100 before it is paid off. DH wants it paid off in 10 yrs, but dont see how that is possible. The lender said if we send two extra payments a year, earmarked for principle, it would save a lot of interest, so that is our goal once the cc's are paid off first. Whiz.
Avatar for netchickie
iVillage Member
Registered: 03-28-2003
Sun, 02-05-2006 - 9:51pm
We pay extra on our mortgage every month too. We've only been in the house for a couple of years and most of the regular payment is interest. Paying more towards the principle reduces the interest paid at the end of the mortgage and that allows it to be paid off quicker. It does not impact the interest amount that you can use for your taxes for many years. I hate getting the statement detailing how much of the payment goes to interest and the little amount that goes towards the principle. One or two extra payments a year make a huge difference in interest paid over the life of the loan. I think it is better to save money by not paying interest than getting part of it back on your tax return.

iVillage Member
Registered: 04-10-2003
Sun, 02-05-2006 - 9:57pm

I always pay *something* extra on my mortgage. Sometimes it's only like $3, sometimes more like $75. It depends how much extra cash I have at the moment. I really like watching that amount going to interest come down each month as more principal is paid!!

btw, I have a Jenna, too. :)




Edited 2/5/2006 10:08 pm ET by jacysmama
iVillage Member
Registered: 03-27-2003
Sun, 02-05-2006 - 10:47pm

I suppose it depends on how you look at it....we did not have 20% for a downpayment and did not want to pay PMI. So, we did a first mortgage and second mortgage at the same time. The second mortgage had a substantially higher interest rate and that is currently our target debt. We moved it to a CC to have a lower interest rate (2.99 for life of the balance) and it's now down to around 6,000 (it was about 20,000 when we took it out 3 years ago). So, on our primary mortgage-no but on the second one yes.

Personally, I wouldn't pay extra simply because I'm targeting one debt so I pay minimums on everything else. I think I get more impact for my money that way. Plus, I agree with whiz about the tax deduction. It's not so much that it's great to get that refund but I'm definitely not getting a tax break for my CC debt, plus the amount due can change and it's generally considered bad debt so I'll deal with that first.

Taleyna

iVillage Member
Registered: 12-05-2004
Mon, 02-06-2006 - 11:00am

Last year, after my debt came out to my husband, he told me not to worry about the credit card and put all our extra money to our 2nd mortgage. It was at a whopping 10% interest, and the card was at 4%, so he wanted that paid down faster.

It really benefitted us greatly when we refi'd our house last Fall. We had paid down enough on the 2nd mortgage that when we combined the 1st and 2nd, we ended up with a payment that was the same as what we were paying for the two loans separately...but were able to drop our loan from 22 years down to 15 years.

So for us, I'd say that paying extra to our mortgage definitely helped. :-D

Pat :-D

iVillage Member
Registered: 01-25-2006
Mon, 02-06-2006 - 11:44am

I think the general wisdom among the 'pros' is that you should never pay additional on a secured, tax deductible loan like a mortgage while you are still paying higher, non deductible interest on unsecured loans. It's sort of like using a water hose on a campfire while an inferno blazes next to you. Ultimately, the 'right' financial decision is to pay things off by highest interest rate down to lowest interest rate, unsecured down to secured and non-deductible down to deductible. Unless your mortgage is substantially higher in interest rate (after you adjust for the tax break), you should apply that money to the other debt. Now, the 'right' decision for your family may be to pay it towards the mortgage because you WILL pay it toward the mortgage and not spend it in the local restaurant or coffee shop instead. If you're getting the motivation to do it where you might not be as disciplined with the other, keep doing what your doing. This kind of comes back to my good, better, best theory. Is it the best thing to do with that $100 per month? Probably not. Is it a good or better choice...probably.

Take what you can use and leave the rest. ;)

Peg

iVillage Member
Registered: 09-29-2000
Mon, 02-06-2006 - 12:05pm
We are down to one last debt and that is my van. I owe just a little over $18,000 and hoping to pay $3000 on it this month with my tax check + my snowflake. So, I guess it is secured debt. Hoping to have it paid off by the end of the year,
Donna
iVillage Member
Registered: 01-25-2006
Mon, 02-06-2006 - 12:25pm

Oh, in that case, the $100 per month is not going to make a huge difference in your picture and will help make a difference long term for the mortgage. The only other thing you don't mention is your eFund/Freedom funds so that would be another consideration.

Looking great! Won't it be wonderful to be out from under that car payment? I'm looking forward to that in a BIG way!

Peg

Pages