Trying to pay more on house over time to decrease interest

[Anonymous]

Hello,

We are just now thinking of possibly paying more on our mortgage to offset the interest we pay on our home loan. We’ve been in the home 10 years now ans finally have the financial ability to do so. What is the best way to pay? Do we pay our mortgage and a half per month or do we way the mortgage on the due date and pay the half middle of the month? I’ve heard different options and I’m not sure what’s best. Any thoughts?

[Anonymous]

We have been making double payments and we pay it 1x a month when paying the monthly payment.

[Anonymous]

Just add extra principal when you pay each month.

[Anonymous]

When you do this, you still pay more than if you'd chosen a shorter time frame from the start. We chose a 15 year instead of a 30 year mortage and stuck with the regular payments.

[Anonymous]

Anonymous wrote:When you do this, you still pay more than if you'd chosen a shorter time frame from the start. We chose a 15 year instead of a 30 year mortage and stuck with the regular payments.

This does not answer the OP's question.

[Anonymous]

You pay into principal extra each month. Make sure it gets designated for principal. Then if your bank allows recast. We saved a lot of money that way. We did two recasts.

[Anonymous]

Anonymous wrote:When you do this, you still pay more than if you'd chosen a shorter time frame from the start. We chose a 15 year instead of a 30 year mortage and stuck with the regular payments.

This isn't necessarily better depending on the interest rate. We refinanced to a 15, which was just slightly more in payment then paid in extra and did recasting.

[Anonymous]

Anonymous wrote:Hello,

We are just now thinking of possibly paying more on our mortgage to offset the interest we pay on our home loan. We’ve been in the home 10 years now ans finally have the financial ability to do so. What is the best way to pay? Do we pay our mortgage and a half per month or do we way the mortgage on the due date and pay the half middle of the month? I’ve heard different options and I’m not sure what’s best. Any thoughts?

I think there are calculators online that will allow you to put your figures in and play with the numbers and then you can see what would work best for you.

[Anonymous]

You could see if your lender is willing to switch you to bi-weekly payments instead of monthly. You'll sneak an extra two payments in there every month that way.

We also do extra principal payments twice a year when DH and I get our bonuses (one of us gets them in January, the other in July).

[Anonymous]

Do you want to pay less over all or do you want to feel better by paying off your home starting now. It is entirely possible that instead of paying towards the loan, you could invest the money and buy the home out in 10 years and have cash left over, vs paying it off in next 15 years.
10 years and money left over is a lot better than 15 years to go.

[Anonymous]

Whatever is easiest for you.

If it's easier to space the payments out for cash flow reasons, do the extra mid-month.

If it's easier to only have one payment per month to keep track of, pay extra along with your normal payment.

There are very minor differences in the interest you'll save (2 weeks interest on the amount of the extra payment), but that pales in comparison to the ability to stay consistent. So just do what's easiest and stick with it.

-- Did this for 6 years, then dropped to a 15-year mortgage at essentially no change in monthly payment. House will be paid off 21 years after we moved in.

[Anonymous]

Anonymous wrote:You pay into principal extra each month. Make sure it gets designated for principal. Then if your bank allows recast. We saved a lot of money that way. We did two recasts.

Recasting doesn’t change the total interest you pay. It is always calculated on the actual outstanding principal, it doesn’t remain static.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You pay into principal extra each month. Make sure it gets designated for principal. Then if your bank allows recast. We saved a lot of money that way. We did two recasts.

Recasting doesn’t change the total interest you pay. It is always calculated on the actual outstanding principal, it doesn’t remain static.

Are you sure? The interest rate and term stay the same. But you have made an additional payment on the principal. So the outstanding balance is less, thus lower interest payments. That is whole purpose of recasting a loan, otherwise why would anyone do it??

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You pay into principal extra each month. Make sure it gets designated for principal. Then if your bank allows recast. We saved a lot of money that way. We did two recasts.

Recasting doesn’t change the total interest you pay. It is always calculated on the actual outstanding principal, it doesn’t remain static.

Are you sure? The interest rate and term stay the same. But you have made an additional payment on the principal. So the outstanding balance is less, thus lower interest payments. That is whole purpose of recasting a loan, otherwise why would anyone do it??

You pay a lower amount of interest. If your original mortgage was for $500K and you have paid it down to $250K, recasting rests your mortgage to the same terms but you are paying the interest on the $250K instead of the $500K which lowers your payment. When our payment got lower, we'd pay the same amount adding the extra to principal again.

[Anonymous]

We pay $450 extra each month toward the principal amount. It’s basically an extra 1.5 mortgage payments per year.