03-22-2011, 05:53 PM
mattkime wrote:
>>It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.
so you're saying that the extra payments don't decrease the interest you'll be paying?
Are you familiar with mortgage amortization charts/schedules? It's easier to visualize it rather than explain it in words. Any extra payments to an existing mortgage are applied to the back end of the mortgage where your $1500 (or whatever) monthly payment is mostly principle. Very little interest. That last $1500 mortgage payment in year 29 is something like $1497 principle and $3 interest. The next extra $1500 payment to an existing mortgage is again applied to the back end where it's something like $1490 principle and $10 interest. So now these two extra payments you just made of $3000 total just saved you $13 in interest. Kinda sucks. Don't it? It's a different story if you are extremely aggressive in making extra payments. BUT THEN,,, if you find yourself with so much money you are making aggressive extra payments month after month, you most likely have the wrong type of mortgage! You should've gone with a 15 year instead of a 30.