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Is it better to pay additional principal or additional interest on a home mortgage?
Wiki User
∙ 13y ago
I'm not sure it's possible to pay additional interest on a mortgage, unless your mortgage company made a mistake and charged you too much. Your interest payment is calculated by your loan servicer, and you technically can't pay EXTRA interest. Any excess money you pay on your loan will go towards the principal, which is always a good idea, if you can afford it.
Wiki User
∙ 13y ago
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Can you just make one extra mortgage payment a year?
Yes, but it would be better if you can divided the extra payment into each mortgage payment through the year instead of waiting until the end of the year to make one extra payment because you will be lowering the principal as the year progresses which lowers the interest accrued.
Does making one extra principal payment a year to your mortgage greatly reduce the length of the loan?
Yes, this is GURANTEED SAVINGS of time and money. For example, I know of a family who were in their mid-forties. They decided to make the incremental equivalent of an extra payment per year, to principal only, by increasing their monthly mortgage payment by 1/12th--a mere $153 in their case. Their discipline saved them $114,837 in interest and 85 payments! NOTE: You save more time and money when you reduce your principal balance earlier in the year as compared to later. In our example, instead of increasing your monthly mortgage payment by 1/12th, you are better off increasing your monthly mortgage payment by 1/6th for the first six months of every year. See examples below: 1 lump sum ($1,834.41) at the start of every year--$119,158.76 interest and 87 payments. 1/6th of mortgage payment ($305.74) for the first six months of every year--$117,147.07 interest and 86 payments. 1/12th of mortgage payment ($153.00) for every month of every year--$114,837 interest and 85 payments. Additional GURANTEED SAVINGS is realized when you employ one of the following five mortgage acceleration techniques: 1. Extra Principal Payments (EPP) 2. Frequent Fractional Payments (FFP) 3. A combination of EPP and FPP 4. Utilizing a Home Equity Line Of Credit (HELOC) 5. Utilizing a HELOC and Credit Card
Can you take out a mortgage to pay off loans that you already have out?
yes, when you take a second bond on your mortgage your pay less interest rates so that is the better option
Does being married get you a better mortgage interest rate?
No. It has nothing to do with being married or not. If that was the case that would be discrimination.
What is the meaning of mortgage refinance?
This type of loan allows homeowners to get a better interest rate by taking out another loan based on the amount of the current loan. This will also tack on a longer amount of time for the home to be paid off, but will give a better rate of interest.
What would help a family pay their mortgage more quickly?
Additional income is the best answer to paying off a mortgage faster. Also, renegotiating with their lender for a better interest rate or shorter pay off period is a way to go.
Are fixed or variable interest rates for mortgages better?
For the average person, a fixed mortgage is better because you can budget for the same mortgage payment for the term or length of the mortgage. The only change would be if your insurance or taxes would go up. With variable interest rate, your mortgage could increase every year due to the increased interest rate.
Assuming cash flow is not a problem is it smarter to use extra money toward a mortgage or invest it in a lower interest CD?
In my opinion paying off your mortgage is the best way to use excess money. For one thing reducing your principal means you don't have to pay interest on the amount you reduced your principal. So that's effectively earning 6% (or whatever your mortgage interest is) on your excess money. Today the most you can get from a CD is about 3%. You will not have as big of a tax deduction because your interest will be less so that's a negative to paying off early but don't forget the interest you earn on a CD is taxable so the tax issue is not that big a deal Finally, as someone with a paid off mortgage I can tell you there's nothing better for your peace of mind, not to mention the joy of not having to send someone $$$$$ every month.
Can you just make one extra mortgage payment a year?
Yes, but it would be better if you can divided the extra payment into each mortgage payment through the year instead of waiting until the end of the year to make one extra payment because you will be lowering the principal as the year progresses which lowers the interest accrued.
Why might someone require the services provided by a mortgage company?
You may be trying to get your first mortgage on your first home, or you may be looking to refinance your existing mortgage at a better interest rate.
Does making one extra principal payment a year to your mortgage greatly reduce the length of the loan?
Yes, this is GURANTEED SAVINGS of time and money. For example, I know of a family who were in their mid-forties. They decided to make the incremental equivalent of an extra payment per year, to principal only, by increasing their monthly mortgage payment by 1/12th--a mere $153 in their case. Their discipline saved them $114,837 in interest and 85 payments! NOTE: You save more time and money when you reduce your principal balance earlier in the year as compared to later. In our example, instead of increasing your monthly mortgage payment by 1/12th, you are better off increasing your monthly mortgage payment by 1/6th for the first six months of every year. See examples below: 1 lump sum ($1,834.41) at the start of every year--$119,158.76 interest and 87 payments. 1/6th of mortgage payment ($305.74) for the first six months of every year--$117,147.07 interest and 86 payments. 1/12th of mortgage payment ($153.00) for every month of every year--$114,837 interest and 85 payments. Additional GURANTEED SAVINGS is realized when you employ one of the following five mortgage acceleration techniques: 1. Extra Principal Payments (EPP) 2. Frequent Fractional Payments (FFP) 3. A combination of EPP and FPP 4. Utilizing a Home Equity Line Of Credit (HELOC) 5. Utilizing a HELOC and Credit Card
Can you take out a mortgage to pay off loans that you already have out?
yes, when you take a second bond on your mortgage your pay less interest rates so that is the better option
Does being married get you a better mortgage interest rate?
No. It has nothing to do with being married or not. If that was the case that would be discrimination.
What is the meaning of mortgage refinance?
This type of loan allows homeowners to get a better interest rate by taking out another loan based on the amount of the current loan. This will also tack on a longer amount of time for the home to be paid off, but will give a better rate of interest.
How can one get a mortgage with bad credit history?
Although having a good credit history is better when applying for a mortgage it is possible to still get a mortgage with a bad credit history. When getting a mortgage with a bad credit history, one will have to pay a higher interest rate. Show the mortgage lender that you have a good job that will cover your mortgage. If you eliminate all other debt it looks better to the lender and gives one a better chance at getting approved.
Should you refinance your mortgage if your current rate of interest is 15 percent?
If your current rate of interest is 15%, whether your refinance your mortgage is something you should discuss with your bank or financial advisor. If you think you could be getting a better rate, you can take it up with them.
How much extra mortgage principal should you pay?
As much as you can afford, but it is also better to pay off higher interest debt first. Paying extra to your mortgage can make a huge difference in payoff date and amount of interest paid though. For example, on a $250,000 loan at 5% for 30 years, paying $200 extra per month reduces the number of monthly payments by 89, or 7.42 years, and reduces the interest and total paid by $65,736.37. A sizable savings for a little extra per month.
