I’ve been asked by quite a few users about the benefits of adding additional principal payments to the loan with each month’s payment. Logically, since you will be paying double the amount of principal each month, you will, in the end, pay off your mortgage in half the time.
As you get further into the term of your loan, your additional principal payments will become larger each month. The reason for this is that during the first few years of your loan, a majority of each payment goes toward interest, leaving just a small percentage going toward the principal. This switches as you get deeper into your loan term, payments to principal become larger and payments to interest become smaller.
In the end, making double principal payments to accelerate your mortgage loan payment basically serve to make your principal amount (and the resulting interest payments) decrease much more rapidly than with standard monthly mortgage payments.
every dollar you pay more than the monthly interest goes straight to the reduction of principle. so it would actually take less than half the time if you made double payments because you wouldn’t acquire nearly as much interest
Thanks John, I think I’m going to see what I can do about accelerating my mortgage payments.
Hi,
Suppose you have a full amortized 30 year mortgage, if you pay twice the payment every month, you can pay your mortgage off in 9 years.
Downloan this Excel spreadsheet you can see how many years you need to pay off your mortgage.
http://www.yourbonus.org/incoming/Amortization.xls
You also see month by month payments.
Hope this helps.
PL