I have a stupid question?

[Fowler]

If I pay a lump sum ....say 20,000 dollars toward my principle on my mortgage.
Will my monthly payments go down?

[MullersLaneFarm]

I don't think so, unless you refinance.

However, more of your payment will go towards your principle and less towards the interest.

[Karenrbw]

Your monthly payments won't go down unless you refinance with the lower principal.
Your principle will be less, but it won't affect your monthly payment unless you have an ARM or refinance.

[Navgatr]

Not sure how your mortgage is set up, but we used to have the option of specifying how we wanted the extra money applied.
We could put it toward the principle, (which saves you the most money in the long run), or we could apply it to interest, escrow, or future payments.

[Harry Chickpea]

Short answer - NO, it just gets paid off sooner. You really have to read the fine print in mortgages now. It used to be that lenders were fine with you making an extra principal payment or two each month to cut the effective interest rate. With any loan, you are balancing the rate of inflation against the interest charges. If you have a secure job and think that inflation will spike, it pays NOT to pay your mortgage off any faster than required. If you see banks refusing to write 30 year mortgages, prepare for inflation.

[fordy]

Originally Posted by Fowler

If I pay a lump sum ....say 20,000 dollars toward my principle on my mortgage.
Will my monthly payments go down?

...................The amount of interest they charge you will go down significantly so the principal portion of the payment will go UP ! Which also means that your loan payoff will arrive sooner . Ask them to print out an Amortization schedule , Before your principal payment , and another , AFter you make a large payment so you'll beable see the differences . , fordy

[Fowler]

Thanks everyone, I wasnt sure how this works. As it is now I will be 70 before it's paid off. I need a plan to pay it off early. So I dont have to worry about it when I am 65.
So would it be better to pay more on princple monthly? I have friends that had a 30 year mortgage and by paying extra, paid off their house in 15 years.
Any suggestions?

[salmonslayer]

Originally Posted by Fowler

Thanks everyone, I wasnt sure how this works. As it is now I will be 70 before it's paid off. I need a plan to pay it off early. So I dont have to worry about it when I am 65.
So would it be better to pay more on princple monthly? I have friends that had a 30 year mortgage and by paying extra, paid off their house in 15 years.
Any suggestions?

Some mortgages allow you to pay half every two weeks which is what we did on our last house. That doesnt seem like it would make much difference but it adds up and a typical 30 year note would be paid off in something like 22 years. Would that help your plans?

[Fowler]

Oh Yes! Thanks Salmonslayer. I will have to give my mortgage holder a call and see what options they allow.
And then come back here and ask y'all which option is best for me not them...LOL

[Cabin Fever]

There are banks and credit unions in our area that are offering home mortgages with NO closing costs and very low interest rates:
<3% for a 15-year mortgage
4% for a 30-year mortgage

You may want to check around and see if the same rates and offers are being given in your area.

[Rick]

If you can refinance and get a current LOW rate, you could pay the 20K and probably get the same monthly payment on a 15 or 20 year loan.

[WildernesFamily]

Fowler, use a free amortization calculator to work it out. Here's one:

http://www.bankrate.com/calculators/...ec_id=m1082526

A bit extra each month (but make sure it's applied to the principal!) can make a big dent in the long run.

[DAVID In Wisconsin]

Fowler I have paid off every house or car I ever financed early just by adding every extra $50 or $100 I could every month. It's amazing how much faster you pay off things this way. Good luck!

[campfiregirl]

Originally Posted by Fowler

Oh Yes! Thanks Salmonslayer. I will have to give my mortgage holder a call and see what options they allow.
And then come back here and ask y'all which option is best for me not them...LOL

You will need to verify with your mortgage company that paying half of your payment 2 weeks before the due date will actually reduce your interest due; if it is only set up to be applied to the account monthly regardless of when the money comes in, then sending them half of it early is not going to do you any good. There are so many variables on mortgages now that you can't assume!

I have a friend who gets paid weekly, and set up all of his bills on a 4-week basis. When he had those extra 4 checks per year, he put them towards his principal and is on track to pay it off 10 years early!

[kasilofhome]

search for a mortage calulater on the internet-
Next pump in you math info

rate, term, #of payment's left. balance owed.

now most cal's have an input area were you can try different payment plans to change the payoff date of your "death" note.

20 g's in the beginning of a term of a loan carries the greatest reduction in the lenght of the time you will be paying.

20 g's down might allow you to refi at a lower rate by increasing the amt. of equitiy you would have which would or could have a snowball effect in an early payoff too. Also, check to see if you carry a "prepayment penalty" In Alaska it is illegal to have such a clause but other states allow it.

[Lizza]

Originally Posted by Cabin Fever

There are banks and credit unions in our area that are offering home mortgages with NO closing costs and very low interest rates:
<3% for a 15-year mortgage
4% for a 30-year mortgage

You may want to check around and see if the same rates and offers are being given in your area.

This is my suggestion as well, refinance into a 15 year mortgage, if you don't have a really good cushion, keep your $20k in cash.

[Fowler]

Originally Posted by WildernesFamily

Fowler, use a free amortization calculator to work it out. Here's one:

http://www.bankrate.com/calculators/...ec_id=m1082526

A bit extra each month (but make sure it's applied to the principal!) can make a big dent in the long run.

WOW thanks for the link!!!

[KIT.S]

One of our mortgage holders offered to recalculate our loan when we made a balloon payment (when a prior house got paid off). We didn't go through a refinance with the fees and paperwork, they just recalculated our loan using the new lower balance, and our payments went down. Also, at that time, the mortgage insurance was no longer required, so they reduced our payments even more. Also, our current mortgage holder actually called ME and offered to reduce our interest rate without going through the application process, etc. They said they'd rather keep our business than have us go through someone else to refinance.

Ask your mortgage company, see if they can come up with something useful to you. If you suggest going elsewhere, they may give you a deal, like when we threaten the TV company to change providers!
Kit

[Silvercreek Farmer]

Unless you have a big pile of cash sitting somewhere I would recommend hanging on to your $20k. Sure it is hard to stomach paying 4-5% on a mortgage (hopefully) when you are only earning 1% (maybe) at the bank. Lot of volitility in the system, you might need that cash. If inflation takes off the fixed rate debt on your morgage will be your best friend! If you do have plenty of other cash, you might want to ask the mortgage company if they offer a re-amortization option. I payed off a portion of my mortgage (to get rid of PMI) and HSBC offered to re-amortize without me even asking, but they wanted a couple hundred dollar fee, so I passed. Doesn't hurt to ask, though.

[wildcat6]

Your payments will not go down, however, more of each payment you make will count towards priciple instead of interest. This will make you pay your loan off much faster.