Do you make one extra payment a year towards your principal?
Or do you pay X$ each month towards your principal?
I think we are going to start doing the latter.
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My mortgage company has an option to add extra each month towards your principle as part of your payment. Works for me!
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I pay the equivalent of one extra mortgage payment a year, but I divide it by 12 and pay a portion of it each month.
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We would love to be able to do this! Haven't started yet though. And will probably wait until we get into our "forever" home.
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We started doing this. We would pay a little extra each month to equal 1 extra payment per year. But then we sat down and talked about it. Our interest rate is at 3.375% for our mortgage, and our student loans are 6-8%....so it was silly for us to be paying extra on our mortgage, when we could be putting it toward a high interest payment instead!
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We pay extra each month towards the principle.
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We haven't had the house a year but we will make one extra payment after tax returns each year.
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We will probably do a lump sum payment before year end.
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My FIL is a CFO of a fairly large company and CPA and told us to make one extra payment a year in December...this way we get to earn interest on the money before we turn it over to the mortgage company.
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We pay extra toward our principle, and when we get our taxes back next year we will make a lump sum payment toward the principle.
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We pay extra each month.
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@MrsBrewer: 3.375% is such a good interest rate! Wow!!!
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We divided up one payment into twelfths and then pay 1/12 extra each month... But with our interest rate being so low, it doesn't make very good incentive to pay extra!
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We pay the max we're allowed to a year on top of our regular monthly mortgage payments. We pay more when we have the cash (so one month we may pay extra and then the next we don't pay any extra), but we make sure we always put in the max by the end of the year. We've owned our house for 2 and a half years and it's already more than half paid off.
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@swedishfish: We just bought out house last year, and interest rates were amazing!! we locked at the perfect time! Plus we have a 15 year mortgage, instead of the 30 year.
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@pui: What do you mean the max? Can't you pay how much ever your wish to pay??
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@MrsBrewer: Nope. We have a limit (a pretty high limit, but still a limit). They want to make some interest from us lol.
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@pui: Ohh I didn't know that!! Is this common for mortgage companies?? I've never heard of this before! But I'm very new to this whole "owning a home" thing
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We pay extra each month on the principal!
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We include an extra $300 with every mortgage payment.
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We pay extra each month.
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@MrsBrewer: I don't know how common it is... also I am in Canada and things may be different here!
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We increased our payment by 20% (that's the max it can be increased by) then we ca put up to another 20% down per year. We will probably put about $10,000 a year on the house minimum. Just increasing our payment by 20% took 10 years off our mortgage!
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Our mortgage rate is 3.625%, so we don't prepay. We would rather keep/invest the cash. I don't think we will ever be able to borrow money so cheaply again. And it's our only debt, albeit a sizeable one.
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We set aside money each month to pay a lump sum once a year. This is only because we can't do it online. We have to call the bank and talk to someone to do it. It sucks.
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We do a lump sum at year end.
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We pay our mortgage weekly through a payment service. It gets deducted right from Our bank account. We end up paying 5 extra weeks of payments. Also we pay an extra $100.00 a week so we pay an extra $400.00 a month towards put mortgage. DH just wants to pay it off!! On our payment schedule now, we have 9 more years on a 30 year mortgage. We will pay it off like 12 years early.
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We used to pay 400 extra principal every month, but the decided it wasn't worth it. With a rate of 3.375%, it's just about keeping pace with inflation, so our money today is better spent going into our investments, which typically do better than that or just kept free for us to spend on things we want to do like go on trips. In a few years, the value of this mortgage is going to feel so much less due to inflation, there's no point on putting any extra money in at all to us.
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We pay a little bit extra each month (I like paying in round numbers, so I round up and then add on another hundred or so). We also make an extra lump sum payment at year end.
Our investments make a much higher return than the interest rate of our mortgage, so I'd rather put my money there; although I'd also love not to have any mortgage!
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@swedishfish: Is the interest you're earning more than what you're paying on the mortgage? Our interest rates on deposits are crummy and our mortgage is the highest-rate debt we have (3.875%, compared to my last student loan at 1.6%) so we put extra toward principal every month because the earned interest from keeping the money just isn't worth it. If the opposite was true, I can see how it would make sense to do it the way you describe.
I know it would probably be smarter financially to invest the extra payments instead, but psychologically, we just want the burden of the mortgage gone ASAP. My DH in particular is really debt-averse so carrying a pretty hefty mortgage just kills him.
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Our mortgage is bi-weekly, and so we make extra payments on each mortgage payment. In the first year and a half we doubled up on each mortgage payment because our interest rate was only 2.6%. We also pay down a lump sum amount with part of my bonus and tax return.
We also increase our mortgage payments (towards principle) by 10% each year.
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We take one mortgage payment, divide it by 12, and add that to my monthly mortgage.
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@Mrs. Jacks: I guess i see low interest rates as paying as little interest as possible! I shudder thinking about the interest rates of the mid-80s during my parents' time.
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@Freckles: I can make more money in my savings account (4% interest) than I can save by paying my 3% loan faster. So we're in no hurry!
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@MrsBrewer: that's exactly why we haven't made any extra payments. We have a great interest rate on the mortgage and really need to pay down our student loans first.
However, in the next year or so we plan on using DH's end of year bonus to put extra towards the principal every year.
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@Mrs. Jacks: 4%! I think i'm barely seeing that in the returns from some of my funds these days.
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We do a lump sum payment usually in December. We don't spend my salary in our day to day budget and are allowed to put up to 20% of the initial mortgage amount once a year. So we save it in a high interest savings account all year, and then will put $20-30,000 lump sum at the end of the year depending how many other "extras" we've indulged in.
But we live in an extremely high cost of real estate area, and essentially use the mortgage on our condo as a way to save up a down payment that keeps us in a position that we don't ever have a mortgage over $300,000... so we need to save up about $400,000 since I'd guess we'd be looking at a house that would be at least $700,000 in a few years. -
@Freckles: You'll kill me then, when I tell you that we have 2 that make 6%. Have you checked out credit unions? Ours gives this percentage rate on the first 25K.
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We are going to put DH's bonus towards the principal value of our primary residence.
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@Mrs. Jacks: I have tried to find credit unions in the NYC area that offer these kinds of rates that I would qualify for. Haven't found even 1
To answer OPs question, I don't pay much towards the principle at all. Interest rate is only 3.625 and DH's 403b has an 8% guaranteed rate of return. I'd rather put all our extra money there.
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