[USER]

Thinking yall might be able to help!
We have the potential to pay off our mortgage next year. We have a 7% interest rate

If/when we pay the mortgage off, we will still have some savings.

My question is: IF I start throwing down some Principal Only payments to lower the loan now, will that benefit me?

Will I save on interest come time I pay it off? Is it worth it? Etc.

thanks!

[Becky]

It will save you a little bit. If you are at the end of your loan you are mostly paying the principal right now. And some interest.

When you were first paying the loan it was mostly interest and very small amount goes to principle.

[Pia]

It will safe you some money but will lower your credit score by quite a bit. It’s insane, but paying off a loan will normally tank your credit, at least for a short period.

Just something to consider if you are looking to open any new loans like car or student loans.

[Damaris]

100% anything extra you can throw at your mortgage as a principal payment, you will not regret (unless you have high interest credit card debt then all extra payment should go to that first)

[Kathleen]

Paying more toward principal will always save you money

[Michelle]

You should be able to download an amortization table that shows future payments, interest, hour long before it’ll be paid off, etc.

Then you can Google for an amortization schedule calculator with extra payments and you can first make your schedule look like the amortization table you downloaded, then you can add in the extra payments and see what changes.

Then you can see how much interest it would save you, which probably isn’t all that much at this point but that isn’t necessarily a reason not to do it.

But you didn’t tell us anything else about your situation, for instance are you investing for retirement?

Are you on track to your retirement goals? Do you have other debt?

Do you have a solid emergency fund? If you do this, where are you diverting funds from?

[Celestine]

If that’s possible I would do it. I wood talk to my bank first

[Lisa]

Any additional amount by which you can reduce the principle will by definition reduce the interest you pay. Yes.

Throw any $& you can spare, every moth.

[Leah]

You can call the bank and they should be able to give an accurate correct answer. Mortgages have different terms, as already mentioned some have a penalty for early pay off.

[Lynette]

Yes, put it to principle only. It does not take the place of the regular payment which you must pay interest on.

[Sandy]

Look at your mortgage statement. It will tell you how much goes to principal and how much interest.

If you’re nearly paid off, most goes to principal.

If you have a higher interest credit card, pay that first.

If this is your only amortizing debt go wild!

[Rhonda]

Yes, paying extra makes a difference!! Always do that! I had a goal to pay mine off before my 50th birthday. DONE.

I didn’t notice a significant change in my credit score- still around 830.

[Aleta]

I would say yes you will save some interest. But be sure to have your emergency savings tucked away.

[Elizabeth]

If you make principle only payments, make sure they don’t apply it to your taxes/insurance escrow or something else. I used actual checks, one for each month’s principle I was paying.

IE: January 2024 principle only. February 2024 principle only.

You will save whatever the interest would have been for that month. Good luck.

[Carlz]

Absolutely. The way mortgages work is the interest owed is calculated each month on the current principal balance.

You regular payment covers that interest first, then the rest is pyt towards the principle.

The lower your principal is the less interest you pay, the sooner and the more you lower your principal the less interest you pay.

[Allison]

It is worth it. You cannot get evicted from a paid off home. You’ll be freeing up a whole lot of money too that you can use for investing in your future or whatever needs you may have.

[Connie]

Yes… you could divert money that you’d be putting in savings and pay it directly on principle now… thereby reducing the interest that you’ll pay when payoff time comes.

Look at your amortization chart to see how much interest you’re paying at this time in your mortgage schedule by using the actual current balance of the mortgage… not the month you’re currently in… also… look at the last 24 months of the chart.

If you pay the mortgage down to the last 24 months how much interest would you pay in those final 2 years?

It may be worthwhile to keep some savings in the bank and only pay the mortgage down… knowing that you have cash on hand should it be needed will offer peace of mind… also, knowing that you’re at the end of the mortgage and that you could pay it off at any time is also important for peace of mind.

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