Mortgage question
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Administrator Alumnus
Joined: Oct 2001
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From: Northwest IN
Mortgage question
Quick question… I recall hearing that if one makes an extra mortgage payment a year, it knocks the term of the mortgage down to 23 years from 30.
So what I've been doing is adding in an extra 1/12 of a payment (towards principle) every time I write a check. Hence my thinking was 1/12 extra over twelve months equals a full extra yearly payment yearly.
However, when running through some of the online calculators, I'm finding this method will get things paid off in 25 years, and not 23???!!! What gives? Is it because I'm not knocking down a large principle chunk at one time?
Thoughts?
So what I've been doing is adding in an extra 1/12 of a payment (towards principle) every time I write a check. Hence my thinking was 1/12 extra over twelve months equals a full extra yearly payment yearly.
However, when running through some of the online calculators, I'm finding this method will get things paid off in 25 years, and not 23???!!! What gives? Is it because I'm not knocking down a large principle chunk at one time?
Thoughts?
Suzuka Master
Joined: Apr 2002
Posts: 6,546
Likes: 0
From: TN
The seven years off the loan is a generalization/average. It also has a lot to do with your loan size and the rate, etc. More often than not, you will lose just over six years on the loan.
For example, if you have a $100,000 loan at 7%, with a payment of $665 and pay an additional $55/m princpal, you only reduce your loan by 74 months.
What is your loan amount, rate, etc?
For example, if you have a $100,000 loan at 7%, with a payment of $665 and pay an additional $55/m princpal, you only reduce your loan by 74 months.
What is your loan amount, rate, etc?
Senior Moderator
Joined: Aug 2002
Posts: 35,218
Likes: 15
From: Swansea, MA
Yeah, it will depend on how you make the payment towards principle.
I like bankrate.com's calculator:
http://www.bankrate.com/brm/mortgage-calculator.asp
Their calculator lets you do either a "extra $$ per month" or "extra payment every year" deal (with amortization table).
I like bankrate.com's calculator:
http://www.bankrate.com/brm/mortgage-calculator.asp
Their calculator lets you do either a "extra $$ per month" or "extra payment every year" deal (with amortization table).
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Senior Moderator
Joined: Aug 2002
Posts: 35,218
Likes: 15
From: Swansea, MA
Originally Posted by Scrib
I thought so... That's why you're my idol 
One of my co-workers wrote a similiar program on one of our old legacy systems...
I found that bankrate calc to be pretty useful when I was trying to figure out what to do when I refinanced in 2003. Went from a 30yr to 20 yr note (15 was stretching it), and can easily knock it down to a almost 16 years with a little extra each month.
Drifting
Joined: Dec 2002
Posts: 2,264
Likes: 0
From: palatine, il
Scrib: You're doing the right thing, but why put a limit of only one extra payment per year? I moved in to my condo the day before Thanksgiving, 1997, so I have been here for about 7 years and one month. In the beginning I was barely able to make the payment each month, but things have changed. 7 years of raises can make a great deal of difference.
About the only good thing I will say about Washington Mutual is that when they get your payment, their computer automatically generates the next months statement. Hence, if I mail a payment say on the 5th of the month I usually get another bill on or about the 15th. Right now, the May 2005 mortgage bill is sitting on the coffee table, and I will pay that next payday ten days from now. But I don't send them what they want, or what they want plus 1/12th.
Besides a minimum amount I voluntarilly will not go under in my checking account, I just send them every penny I got. In a really good month I may make a payment that is twice what they asked for, but a good average figure would be 1.5 to 1.8 times what is required.
Tip: in order to do this, and not screw yourself, go through your checkbook and write down the due dates for every bill you're gonna get, monthly and annually. Monthly: gas, electric, phone, mortgage, car payment...Annually: Home insurance, life insurance, car insurance, vehicle sticker, plates... It's the ones that come out of the blue that can screw you up.
So essentially last year I made 16 mortgage payments and all of them exceeded the amount due. I'm projecting about another 33-34 months to go, and I will completely own the joint. And this is on a 15 year mortgage.
I know for you it is early on in your new crib, and the mortgage bill probably looks like Mt. Everest. But trust me, a day will come when you can pay more that the monthly amount plus 1/12th. When it comes, do so.
My view on bills is you're gonna have to pay them anyway, so pay them sooner rather than later. When a bill comes in over here, it is back in the hands of the USPS usually 16 hours later, check enclosed.
Here is about the point where I am sure some well intentioned do-gooder will chirp in about the advantages/disadvantages of doing this vs. the present/future value of money. Yes, the mortgage amount remains fixed (except for variations in taxes), but the interest you can get for money saved in whatever instution will rarely, if ever, exceed the rate you are being charged to borrow money, so screw that.
You are thinking the right way. Think about thinking bigger. 34 months is a long way away for me. But I can see the light at the end of the tunnel, and for once, it's not another train. I'm excited. I actually ENJOY seeing that next bill come in from WaMu! Remember the last time you made that final car payment? Same feeling, but multiply by about 20X. You just got rid of the biggest bill in your life you're ever going to get!
Of course, this means I live like a relative troll, but life is good. I gotta CLS (paid for, too).
About the only good thing I will say about Washington Mutual is that when they get your payment, their computer automatically generates the next months statement. Hence, if I mail a payment say on the 5th of the month I usually get another bill on or about the 15th. Right now, the May 2005 mortgage bill is sitting on the coffee table, and I will pay that next payday ten days from now. But I don't send them what they want, or what they want plus 1/12th.
Besides a minimum amount I voluntarilly will not go under in my checking account, I just send them every penny I got. In a really good month I may make a payment that is twice what they asked for, but a good average figure would be 1.5 to 1.8 times what is required.
Tip: in order to do this, and not screw yourself, go through your checkbook and write down the due dates for every bill you're gonna get, monthly and annually. Monthly: gas, electric, phone, mortgage, car payment...Annually: Home insurance, life insurance, car insurance, vehicle sticker, plates... It's the ones that come out of the blue that can screw you up.
So essentially last year I made 16 mortgage payments and all of them exceeded the amount due. I'm projecting about another 33-34 months to go, and I will completely own the joint. And this is on a 15 year mortgage.
I know for you it is early on in your new crib, and the mortgage bill probably looks like Mt. Everest. But trust me, a day will come when you can pay more that the monthly amount plus 1/12th. When it comes, do so.
My view on bills is you're gonna have to pay them anyway, so pay them sooner rather than later. When a bill comes in over here, it is back in the hands of the USPS usually 16 hours later, check enclosed.
Here is about the point where I am sure some well intentioned do-gooder will chirp in about the advantages/disadvantages of doing this vs. the present/future value of money. Yes, the mortgage amount remains fixed (except for variations in taxes), but the interest you can get for money saved in whatever instution will rarely, if ever, exceed the rate you are being charged to borrow money, so screw that.
You are thinking the right way. Think about thinking bigger. 34 months is a long way away for me. But I can see the light at the end of the tunnel, and for once, it's not another train. I'm excited. I actually ENJOY seeing that next bill come in from WaMu! Remember the last time you made that final car payment? Same feeling, but multiply by about 20X. You just got rid of the biggest bill in your life you're ever going to get!
Of course, this means I live like a relative troll, but life is good. I gotta CLS (paid for, too).
Suzuka Master
Joined: Jun 2003
Posts: 8,333
Likes: 0
From: SoCal
Originally Posted by dfreder370
Scrib: You're doing the right thing, but why put a limit of only one extra payment per year? I moved in to my condo the day before Thanksgiving, 1997, so I have been here for about 7 years and one month. In the beginning I was barely able to make the payment each month, but things have changed. 7 years of raises can make a great deal of difference.
About the only good thing I will say about Washington Mutual is that when they get your payment, their computer automatically generates the next months statement. Hence, if I mail a payment say on the 5th of the month I usually get another bill on or about the 15th. Right now, the May 2005 mortgage bill is sitting on the coffee table, and I will pay that next payday ten days from now. But I don't send them what they want, or what they want plus 1/12th.
Besides a minimum amount I voluntarilly will not go under in my checking account, I just send them every penny I got. In a really good month I may make a payment that is twice what they asked for, but a good average figure would be 1.5 to 1.8 times what is required.
Tip: in order to do this, and not screw yourself, go through your checkbook and write down the due dates for every bill you're gonna get, monthly and annually. Monthly: gas, electric, phone, mortgage, car payment...Annually: Home insurance, life insurance, car insurance, vehicle sticker, plates... It's the ones that come out of the blue that can screw you up.
So essentially last year I made 16 mortgage payments and all of them exceeded the amount due. I'm projecting about another 33-34 months to go, and I will completely own the joint. And this is on a 15 year mortgage.
I know for you it is early on in your new crib, and the mortgage bill probably looks like Mt. Everest. But trust me, a day will come when you can pay more that the monthly amount plus 1/12th. When it comes, do so.
My view on bills is you're gonna have to pay them anyway, so pay them sooner rather than later. When a bill comes in over here, it is back in the hands of the USPS usually 16 hours later, check enclosed.
Here is about the point where I am sure some well intentioned do-gooder will chirp in about the advantages/disadvantages of doing this vs. the present/future value of money. Yes, the mortgage amount remains fixed (except for variations in taxes), but the interest you can get for money saved in whatever instution will rarely, if ever, exceed the rate you are being charged to borrow money, so screw that.
You are thinking the right way. Think about thinking bigger. 34 months is a long way away for me. But I can see the light at the end of the tunnel, and for once, it's not another train. I'm excited. I actually ENJOY seeing that next bill come in from WaMu! Remember the last time you made that final car payment? Same feeling, but multiply by about 20X. You just got rid of the biggest bill in your life you're ever going to get!
Of course, this means I live like a relative troll, but life is good. I gotta CLS (paid for, too).
About the only good thing I will say about Washington Mutual is that when they get your payment, their computer automatically generates the next months statement. Hence, if I mail a payment say on the 5th of the month I usually get another bill on or about the 15th. Right now, the May 2005 mortgage bill is sitting on the coffee table, and I will pay that next payday ten days from now. But I don't send them what they want, or what they want plus 1/12th.
Besides a minimum amount I voluntarilly will not go under in my checking account, I just send them every penny I got. In a really good month I may make a payment that is twice what they asked for, but a good average figure would be 1.5 to 1.8 times what is required.
Tip: in order to do this, and not screw yourself, go through your checkbook and write down the due dates for every bill you're gonna get, monthly and annually. Monthly: gas, electric, phone, mortgage, car payment...Annually: Home insurance, life insurance, car insurance, vehicle sticker, plates... It's the ones that come out of the blue that can screw you up.
So essentially last year I made 16 mortgage payments and all of them exceeded the amount due. I'm projecting about another 33-34 months to go, and I will completely own the joint. And this is on a 15 year mortgage.
I know for you it is early on in your new crib, and the mortgage bill probably looks like Mt. Everest. But trust me, a day will come when you can pay more that the monthly amount plus 1/12th. When it comes, do so.
My view on bills is you're gonna have to pay them anyway, so pay them sooner rather than later. When a bill comes in over here, it is back in the hands of the USPS usually 16 hours later, check enclosed.
Here is about the point where I am sure some well intentioned do-gooder will chirp in about the advantages/disadvantages of doing this vs. the present/future value of money. Yes, the mortgage amount remains fixed (except for variations in taxes), but the interest you can get for money saved in whatever instution will rarely, if ever, exceed the rate you are being charged to borrow money, so screw that.
You are thinking the right way. Think about thinking bigger. 34 months is a long way away for me. But I can see the light at the end of the tunnel, and for once, it's not another train. I'm excited. I actually ENJOY seeing that next bill come in from WaMu! Remember the last time you made that final car payment? Same feeling, but multiply by about 20X. You just got rid of the biggest bill in your life you're ever going to get!
Of course, this means I live like a relative troll, but life is good. I gotta CLS (paid for, too).
check out these calculators for comparison:
http://dinkytown.com/java/MortgagePayoff.html
http://dinkytown.com/java/ExistingBiweekly.html
Senior Moderator
Joined: Aug 2002
Posts: 35,218
Likes: 15
From: Swansea, MA
You really have to analyse the tax benefits.
I hate having to pay $8K in interest a year to get back $3k in taxes. I feel like I'm losing more than $5k a year. At the point I'm at with the priniciple to interest ratio on my note, that's exactly what's happening. If you take out my standard deductions, the tax savings from the interest deduction is even less.
Maybe I'm looking at it wrong and I just hate owning anyone money...
I hate having to pay $8K in interest a year to get back $3k in taxes. I feel like I'm losing more than $5k a year. At the point I'm at with the priniciple to interest ratio on my note, that's exactly what's happening. If you take out my standard deductions, the tax savings from the interest deduction is even less.
Maybe I'm looking at it wrong and I just hate owning anyone money...
Suzuka Master
Joined: Jun 2003
Posts: 8,333
Likes: 0
From: SoCal
Originally Posted by GreenMonster
You really have to analyse the tax benefits.
I hate having to pay $8K in interest a year to get back $3k in taxes. I feel like I'm losing more than $5k a year. At the point I'm at with the priniciple to interest ratio on my note, that's exactly what's happening. If you take out my standard deductions, the tax savings from the interest deduction is even less.
Maybe I'm looking at it wrong and I just hate owning anyone money...
I hate having to pay $8K in interest a year to get back $3k in taxes. I feel like I'm losing more than $5k a year. At the point I'm at with the priniciple to interest ratio on my note, that's exactly what's happening. If you take out my standard deductions, the tax savings from the interest deduction is even less.
Maybe I'm looking at it wrong and I just hate owning anyone money...
i feel that way as well, that is why i'm on a 15 year fixed and pay an additional amount on top of my regular mortgage payment. i despise owing money, and throwing away good money on interest, but fact of the matter is, those that are taking out home loans probably don't have the 300-500K in cash to pay off the loan. soo....the mortgage interest at 5% - what you can deduct from taxes, is actually a pretty good rate. if you prepay, the 5% - tax savings is the absolute return on your investment. however, there are much better investment returns out there, as mentioned earlier, and sometimes you need to give in to the lesser of two evils (not giving all your disposable money to prepay), if it means you'll make more down the line with the same dollar by investing elsewhere.
Thread Starter
Administrator Alumnus
Joined: Oct 2001
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From: Northwest IN
Dave... I appreciate the feedback.
As I diversify our portfolios, invest into the 401Ks, IRAs, side investments, etc... Money is a little tight to make any more substantial principle payments. And considering we took out a rather sizeable loan when we closed 6 months ago... Mortgage went up 165% from our condo... Taxes tripled... It's a different ballgame financially with this house as there has been no change in take-home employment income.
That said, it's just not possible. That and possible beginnings of a future family, money flow will really change.
I'll be stuck with a mortgage for probably 23 years or so. That’s not to say that I don’t want to pay it off… It just isn’t workable at our current income levels.
Eric
As I diversify our portfolios, invest into the 401Ks, IRAs, side investments, etc... Money is a little tight to make any more substantial principle payments. And considering we took out a rather sizeable loan when we closed 6 months ago... Mortgage went up 165% from our condo... Taxes tripled... It's a different ballgame financially with this house as there has been no change in take-home employment income.
That said, it's just not possible. That and possible beginnings of a future family, money flow will really change.
I'll be stuck with a mortgage for probably 23 years or so. That’s not to say that I don’t want to pay it off… It just isn’t workable at our current income levels.
Eric
Senior Moderator
Joined: Aug 2002
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From: Swansea, MA
Originally Posted by GTKrockeTT
then you should do a lower year term...20 or 15.
Had a 30 year, started in 2001, refin to a 20 in 2003
Didn't want to stretch the budget with a 15 (single guy w/ a single income). I envy DINKS (dual incomes no kids)... But as Eric points out, that usually doesn't last for long 
EDIT: I really think it's nice to be able to discuss these types of things on a "car forum". Thanks Soopa
Drifting
Joined: Dec 2002
Posts: 2,264
Likes: 0
From: palatine, il
GT: Agreed. That is why 15% of my pretaxable income goes to my 401(k) for 14 and 3/4 years, now closing on 200K, but nothing is guaranteed, is it now.
And Eric, to paraphrase, I believe I did say that "i,m sure that you think the mortgage bill looks like Mt. Everest right now", and "believe me, there will come a day when you can pay more."
Here is something hopeful: Your bill went up 165% when you "moved up". Mine went up 228%. And no, I couldn't send in more right off the bat. It took a few years. It's just financial discipline, which by viewing your posts and knowledge, it's obvious you've got it.
Obviously, the volume of dollars you have to send in each month exceeds mine, house vs. condo. But my place is no sloutch, and remember, assuming your wife works also (just a guess, I don't know), collectively I'm guessing the two of you pull down more coin that just me.
Like I said, there will come a time.
And for me, my time table is only on schedule as long as I can resist buying a new car. Hmmmmm....Chrysler has a 425 HP crossfire. Nah. I need a back seat and a big trunk. I hope the Acura full wheel base coupe designers are dragging their feet. Otherwise, I'm a gonner.
The opposite effect can apply also. A good friend refinanced at an appropriate time, but he couldn't resist some "extra cash", to the tune of $10,000 in pocket on a 35,000$ finance. If this was put into the house, well that is one thing. Blowing the money as mad money (he bought a Harley) was quite another. I figure it is going to take him 40 years to pay off his 30 year loan.
And Eric, to paraphrase, I believe I did say that "i,m sure that you think the mortgage bill looks like Mt. Everest right now", and "believe me, there will come a day when you can pay more."
Here is something hopeful: Your bill went up 165% when you "moved up". Mine went up 228%. And no, I couldn't send in more right off the bat. It took a few years. It's just financial discipline, which by viewing your posts and knowledge, it's obvious you've got it.
Obviously, the volume of dollars you have to send in each month exceeds mine, house vs. condo. But my place is no sloutch, and remember, assuming your wife works also (just a guess, I don't know), collectively I'm guessing the two of you pull down more coin that just me.
Like I said, there will come a time.
And for me, my time table is only on schedule as long as I can resist buying a new car. Hmmmmm....Chrysler has a 425 HP crossfire. Nah. I need a back seat and a big trunk. I hope the Acura full wheel base coupe designers are dragging their feet. Otherwise, I'm a gonner.
The opposite effect can apply also. A good friend refinanced at an appropriate time, but he couldn't resist some "extra cash", to the tune of $10,000 in pocket on a 35,000$ finance. If this was put into the house, well that is one thing. Blowing the money as mad money (he bought a Harley) was quite another. I figure it is going to take him 40 years to pay off his 30 year loan.
Senior Moderator
Joined: Aug 2002
Posts: 35,218
Likes: 15
From: Swansea, MA
Originally Posted by dfreder370
The opposite effect can apply also. A good friend refinanced at an appropriate time, but he couldn't resist some "extra cash", to the tune of $10,000 in pocket on a 35,000$ finance. If this was put into the house, well that is one thing. Blowing the money as mad money (he bought a Harley) was quite another. I figure it is going to take him 40 years to pay off his 30 year loan.
Yeah, it kills me when I hear people rolling their car payments into a 30 year mortgage refin under the quise that they can write off the interest. I didn't want to pay for a car over 5 year, forget about having to pay it for 30
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Administrator Alumnus
Joined: Oct 2001
Posts: 26,326
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From: Northwest IN
Dave... I hear you. And appreciate your candor.
As you know it's certainly tough to balance funds and make sure one is putting the money in the correct places. IMHO, stashing away enough coin to retire, sans social security, is the most vital move anyone can make these days... That's my priority right now. The mortgage will go away by the time I'm 50. And I can deal with that.
As you know it's certainly tough to balance funds and make sure one is putting the money in the correct places. IMHO, stashing away enough coin to retire, sans social security, is the most vital move anyone can make these days... That's my priority right now. The mortgage will go away by the time I'm 50. And I can deal with that.
Health's Angels
Joined: Jun 2002
Posts: 2,634
Likes: 2
From: Ottawa, Ontario
Originally Posted by GreenMonster
You really have to analyse the tax benefits.
I hate having to pay $8K in interest a year to get back $3k in taxes. ...
I hate having to pay $8K in interest a year to get back $3k in taxes. ...
Drifting
Joined: Dec 2002
Posts: 2,264
Likes: 0
From: palatine, il
Eric: I'll be done by the time I am 56-if I make it that long. I just got some not very good news from the doctor. Such as not to jack your thread, I'll post in ramblings.
You got a good financial head on you, and that makes me think. I know more than one person who makes very little, but is well off financially. Conversely, I know people who make a ton of money but are only a few steps away from the poor house.
Money. It's all about how you manage it.
You got a good financial head on you, and that makes me think. I know more than one person who makes very little, but is well off financially. Conversely, I know people who make a ton of money but are only a few steps away from the poor house.
Money. It's all about how you manage it.
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