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

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iVillage Member
Registered: 09-29-2000
Mon, 02-06-2006 - 7:36pm
I know I am probably going to get flamed...but here goes. We do have an efund. We have about $13,000 in there after our tax return. My DH finially got a new job after being laid off for a long time. Now they are moving part of the plant to Mexico. So, there is another chance he will get layed off again. I think after our vacation at the end of March, I am going to take a relook at things. See how much we pay it down from now until then and see what DH job looks like. So, I'm really hoping to have it paid off rather quickly. (one way or another).
Thanks for your advice,
Donna
iVillage Member
Registered: 03-27-2003
Mon, 02-06-2006 - 9:26pm
I don't think anyone will flame-I think the answers that said don't pay the mortgage early mostly come from people like myself who have CC debt. It's awesome that you don't have that and so can follow the financial advice to pay off the mortgage early. As you've added more and more explanation of where you are at financially, I agree that paying $100 extra is a useful thing to do for your situation. One of the great things about this board is I think we're willing to acknowledge that everyone is in a different boat and while we like to stick our boats together to make a huge debt reduction fleet, there will be people who are driving the speedboats like yourself and those of us pulling the oars on a dilapidated rowboat in the back. The advice on how to handle money will differ depending on the person.
Avatar for endomagazine
iVillage Member
Registered: 11-09-2004
Mon, 02-06-2006 - 10:24pm

Hello,

I would suggest paying off any smaller debts (car loan, student loan, credit cards) first before paying additional principal toward the mortgage. If you have other debts that could use the $100 monthly snowball, accelerating the payment on those debts. The reason I suggest this is that you would reduce the # of payments on a smaller debt faster with an added $100 per month than you would by paying extra mortgage principal.

If you'd like to speed up your mortgage payments a little without any additional sacrifice, look into paying bi-weekly (twice a month). Since there are two months out of the year (usually) that include an extra week, making bi-weekly payments means that you automatically pay an extra payment to your mortgage by default. This cut about 7 years off of our mortgage payment schedule and hasn't *felt* like we were paying anything extra.

Basically, I'd advocate Dave Ramsey's plan in "Total Money Makeover":

1) Build $1000 baby emergency fund.
2) Pay off credit cards and loans
3) Build a large emergency fund that includes 3-6 months of living expenses
4) Send 15% to retirement
5) Pay off mortgage early (applying the payments you snowballed on your cc's and loans)

-there are more steps after that, but once you've paid off your mortgage.. well.. it's a good thing!

Sincerely,
Lindsey Schocke




Edited 2/6/2006 10:25 pm ET by endomagazine

Sincerely,
Lindsey Schocke

Geeks on Tap: Mission Accomplished

iVillage Member
Registered: 01-25-2006
Mon, 02-06-2006 - 10:35pm

I can't imagine why you would get flamed. Sounds like you've got your ducks all lined up and marching along just fine. 13k...man, I can only dream! Considering you only have the mortgage and car payment right now you seem to be sitting pretty well even in the face of a potential layoff. Hope it doesn't happen!

Thanks for sharing a little more about your situation. It helps me to see how people are working this stuff out. My initial reaction to your post (because I didn't have enough info) was that it wasn't a good idea to pay extra on the mortgage but when you put all the pieces of the puzzle on the table, it makes perfect sense!

Peg

iVillage Member
Registered: 02-07-2006
Tue, 02-07-2006 - 9:10am
Paying extra on a mortgage makes since and it does take so much of the principle. But if you have other debt like c/c's and car payments it makes more since to add that extra to your revolving debt which mostlikely has higher interest rates. Once your c/c's and car payments are paid you would be able to add more to your mortgage and you could pay it off years earlier.
iVillage Member
Registered: 05-19-2004
Tue, 02-07-2006 - 11:34am

I think you're doing great girl!! I hate looking at that statement and seeing barely anything going to principal!!

You guys seem to have it together. IF you had cc debt, I would suggest to pay those first. I was so focused on ccs for years that I didn't worry about our current mortgage. Now that we have those and our suv loan paid off (this month with tax refund!)~~ we plan on buying a new home and putting around $300/month extra on it as well as continuing to pay off DH's student loan($8k). (And building savings back up!)

We are 30 and decided we don't want any more car payments and want to pay the new mortgage off as soon as possible so we can travel and actually have money put away to retire on!
Way to go! Nicki

iVillage Member
Registered: 12-12-2004
Wed, 02-08-2006 - 12:35am
HI, Pat. Ours is a 30-yr fixed. With the current cool-down in real estate, I would like to do a 15-yr, but it is too expensive, so the alternative would be to pay, what, 3 extra payments per year to make it a 15 -yr? Whiz.
iVillage Member
Registered: 12-05-2004
Wed, 02-08-2006 - 6:48am

Hi Whiz! I'm not really sure exactly how much in extra payments would bring your loan down to 15 years. Math was never my best subject. LOL! :-D I just threw everything I could to our 2nd mortgage. It became my snowflake, and everything from last year's tax refund to coupon savings at the grocery store went to it. :-D Every little bit helps, though! :-D

Pat :-D

iVillage Member
Registered: 06-23-2005
Wed, 02-08-2006 - 12:45pm

Whiz-
Try this mortgage calculator at bankrate.com:
http://www.bankrate.com/brm/mortgage-calculator.asp

It should let you enter your extra payments, then click on the amortization schedule and see your new payoff date. It's fun to play around with, dream with, you know?

And good job on paying down the mortgage! DH & I are planning on doing that after we've paid off cc's, put more into retirement etc. I want to be able to LIVE life when we're retired :).

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