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Loan Payments payoff early Options
johnhagen
#1 Posted : Sunday, August 10, 2003 12:35:09 PM
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Pay two payments per month not one.
skruzich
#2 Posted : Sunday, August 10, 2003 2:10:51 PM
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Actually two payments instead of one will pay it off faster than half the time. You will pay it off in like 10 years on a 30 year note.
Most people take their montly payment, divide it by 12 and add that to their payment each month towards the principal. For example you have a normal 1200 a month payment, add 100 dollars for a total of 1300. The extra 100 will go towards your principle making a 13th payment each year. This will take 7 years off your 30 year note. Now you can add an additional 100 a month for a total of 1400 a month and it will take off another 3 1/2 years off your note.
If you pay a payment and then a second payment each month of the full note, what happens is that the first payment only pays probably 50 -100 dollars to the principal the rest goes into the finaciers pocket. The second note pays into the principle total reducing it by that amount.
BE CAREFUL! If you prepay too much money, you quite possibly will have to pay them a penalty for prepaying too much money in a years time. Most finance companies will have a prepay penalty if you overpay or prepay more than 6500.00 a year.
steve
Terri
#3 Posted : Monday, August 11, 2003 3:29:59 PM
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We just closed on 5 acres of land. There is no pre-payment penalty, we not only read the contract we asked, as well. (some of the language is a bit stiff, we wanted no misunderstandings).

I called the mortgage company and asked for a read-out of how much goes to interest and how much goes to principal each month.

To start with, only $50 a month goes to principal, so I will start out paying $50 extra each month. Near the end of the payment time, Almost ALL of the payment will go towards principal, so each month the amount of extra that I pay will get slightly larger.

Be sure you mark the extra money towards the principal! That way there will be no mix-up with them thinking you wanted to make March''s payment in January, for example.
mikeg
#4 Posted : Monday, August 11, 2003 5:51:39 PM
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Just so there are no mistakes at the bank be sure they know the extra money is to be applied to the principal and not an additional payment in advance.
skruzich
#5 Posted : Monday, August 11, 2003 7:48:15 PM
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You have to realize that when you get to the halfway mark on your note, half of the money is interest and half is principal. The idea you want to do is to get on that other side where most of your payment is going toward principal. The best deal i have found is a 15 year mortgage. You can get lower interest rates and you own it in 15 years. Secondly, you can do the same thing with it and reduce your mortgage payements the same way.
Steve
JFS
#6 Posted : Monday, August 11, 2003 8:54:13 PM
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I went from a 30year mortage to a 15 my payments went up 100 dollars. But it sure feels good to have my house payed off last year.
andydufresne
#7 Posted : Tuesday, August 12, 2003 4:14:50 AM
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Posts: 134,494
IF you can pay AHEAD without penalty, the way to do it is this:

Pay your REGULAR payment each month PLUS pay the amount of the next payment that would be applied to the principal. You should have a schedule that will give you that. MAKE CERTAIN to not that one is the regular payment and the other is to be applied to principle.

DanR
#8 Posted : Wednesday, August 13, 2003 3:03:06 PM
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Since most people have a form they have to send in with each payment, just write on the form "Extra Principle" and there will be no mistaking what you mean. Also, check each yearly statement! When you find an error, and you will, then you can go to your states consumer advocate and they will help you get the mortgage company to give you proper credit. I have been doing this for many years and in the end I will pay less in intrest than I will pay in principle. It sure feel good to "stick it to the bank"!
Radio217
#9 Posted : Wednesday, August 13, 2003 3:03:06 PM
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Posts: 134,494
I read an article quite a while ago that had a formula for paying off a loan in half the time. I would love to get that formula if anyone has it.
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