omegahpla
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That will save you interest on about 1/100th of the principal throughout the life of the loan, but that doesn't add up to what you're talking about.
Paying 1/2 of every payment 2 weeks early will take a lot off, probably take off about 8 years.
The more you pay at the start the less you will be charged interest on, and interest on a 30 year loan is more than double what the principal is. When you pay $1000 before interest even starts, you save probably $3500 interest ... but a larger down payment does the same exact thing.
If you really want to pay it off in about half the time, get a 15 year loan and you will also get a better interest rate to boot, which saves you more. |
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J.O-Devils 8 straight!!!
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Making an extra payment a year will knock of between 7 & 10 years off of the balance depending on the loan size.
If your mortgage payment is $1,000(for numbers sake) around $800 goes to interest and only about $200 to the balance. So that is $2400 a year to the balance add another $1000 to the balance(extra payment) and you will pay it off faster because that extra $1000 goes right to principle. |
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gold dust woman
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Making one extra payment per year will do it! |
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Emanon
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No, but making one extra payment per year will knock off about seven years. |
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Doctor Deth
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no - if you pay an extra amount each month equal to the principal amount of the mortgage for that month's payment (it will increase each month), you will shorten the mortgage by about 7 yrs - you'd have to pay a higher amount than that each month to take 10 years of f the Mtg |
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melissa
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no, but if you pay more each month towards the principle..it will reduce the years on your loan |
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SmartA$$
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the more you pay, and the sooner you pay it, the more you save in the long run and the faster you pay off your loan.
I'd imagine that what your mom is suggesting is that you make every payment a month early. Normally you don't owe your first payment until a month after the loan is issued. But if you started monthly payments the day it was issued, you be paying every payment a month early. What this would do is lower your balance so that you accrue less interest during the month, then your next payment would pay more principle and less interest so the effect begins to compound in your favor.
For the 10 year milestone, you have to run the numbers yourself for your specific situation but 10 years seems very possible with a pre-payment strategy like this.
If you search Microsoft's website you can find an Excel document call "Loan amortization" I suggest that you download it and put in your loan info. You can enter extra payments and it will compute how much interest those extra payments will save you over the life of the loan. It is very easy to use. |
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acermill
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Of course not. Not sure where your mother heard that, but it's entirely untrue. |
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God Bless Everyone!
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No! it's not true |
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yoinkityboinkity
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Only if you make your first house payment for 1/3 the value of the loan IE paying a 60000 first payment on a 180000 loan.
Maybe your mom misunderstood the advice and the person was suggesting making a large down payment. |
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BLUEJAY57
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not true |
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josh_c
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As others have said, it won't ammount to that much, but don't listen to those who claim you have to pay off 1/3 of the principle to save 1/3 the time cause that is flat out not true. That does not account for interest. |
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Big Deal Maker
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I`m not a lender. Your first payment on the new loan is done on the day you sign the loan papers (see your escrow fees and payments made on your behalf)
Second the next month is your free month. If you want to pay the following month it could save you that free months interest. Outside of that the only other way is to pay an extra amount to be placed towards the principle payment. Even if you pay extra you loan amount will decrease faster but your payment will stay the same all the way thru the 30 years. Unless of course you refinance at a later time. As always i highly recommend to use a real estate attorney before you sign you loan docs. It will be well worth the few hundred they will charge you. |
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Tundra21999
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NO.......why would it? |
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Ryan D
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no. it will not be the case.. I do however, think i know what she heard or what was meant. It is the case that if you make the extra one payment each year, then you can pay your loan off 5-10 yrs faster. But that is if you make the 1st payment at signing, then still make your 1st regular payment the 1st month, and also if you make the equivalent of 1 extra payment per year, every year, then you cut your loan time down drastically. But no, you can't make 1 mortgage payment and knock 10 yrs off the loan. Sorry. |
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Jr M
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NO |
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Kelsie C
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No. Making 13 payments per year instead of 12 will reduce the amount of time to pay off a 30 year mortgage to less than 18 years. Play around with the mortgage calculators at Bankrate.com |
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bob shark
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If you made your payments weekly instead of monthly, the amortisation time would drop around 10 years. |
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bffer1
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no, but making extra payments every month might. |
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daeve930
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20 years in the business, from processing to loan officer to underwriter...never heard that one before.
But if you make an extra payment each year (divide it up and spread it out if you need to), or double the principal for each payment or just send however much extra you can each month...any or all of those things will reduce that principal every month.
As the principal balance decreases, the amount of interest taken from each payment also decreases, meaning that the amount going to reduce the principal is increasing. That makes sense once you think about it. |
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Sophie B
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No but if you make a principle only payment, equall to the principle due in the first ten years, that will knock ten years off...
you still have to make payments on time..... |
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JM
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what? NO |
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AtHomeDad
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no it does not or everyone would do it there is no way to knock of 10 years t |
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Denise
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I have never heard of that. When my husband and I bought our house, we had to pay half a month of a house payment, but it didn't lower the amount of the loan. Maybe she was thinking of a bi-weekly plan. Some mortgage companies offer this. The best way to knock down the amount of the loan is to pay extra principal every month. We pay at least $50 extra a month and we have already lowered our payments $15. I don't know for sure, but I'm sure we will be able to pay our house off about 3-5 years earlier if we continue to do this.
Here's a link on paying off a 30-year mortgage early:
http://michaelbluejay.com/house/payoffearly.html |
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GuitarDogg
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NO!!! You can reduce the loan period by making extra payments, but one payment isn't going to reduce it by one-third. Your mom watches too much TV! |
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larryljones
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If you pay the first payment the day of closing, based on a 30 year term, and you pay all the rest of the payments in the exact amount on time every month, you will pay off the loan in 354.05 months or 29 1/2 years. |
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crackerjohn
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Only if you "over pay" by the principal amount equal to your final 120 payments on your amortization schedule.
In other words, no. |
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bookerTkool
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That is preposterous. Yo momma heard wrong |
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