Do you pay extra down on your mortgage principal each month?

[Goldy]

This is a question I have struggled with for quite some time and finally decided to pay biweekly and pay an additional 50 bucks per payment. I have only paid one mortgage payment so far so it will be interesting to see if this needs to be changed in the future.

[humandraydel]

Originally Posted by disneysteve

Not necessarily. You need to look at actual numbers.

I agree 100%...but I'm not talking about you. I'm talking about people who say "I've built up my EF to 6 months...should I redirect my monthly savings to my mortgage?" IMHO, that can be a mistake.

[disneysteve]

Originally Posted by humandraydel

I agree 100%...but I'm not talking about you. I'm talking about people who say "I've built up my EF to 6 months...should I redirect my monthly savings to my mortgage?" IMHO, that can be a mistake.

Agreed. As I've said, prepaying the mortgage should happen AFTER all of the other financial ducks are in a row. If you don't have a 6-month EF AND are not putting 15% into retirement AND are not saving for your kids' education AND are not setting aside money for short term needs, you probably shouldn't be prepaying the mortgage.

[LivingAlmostLarge]

I'm in that boat. We are saving for retirement, trying to save for college and getting short term savings going. It's slow building. Will we ever prepay our mortgage? Maybe in 5 years. I round up to the next hundred for now because i'm lazy. But it's hard honestly to keep saving for everything and prepay the mortgage when you have things like home repairs, car replacement, college, etc.

[jerrycates]

I believe it is good to pay a little over the principal especially if you can do it on a monthly basis. It makes you feel the principal move a little bit faster. I try my best to do that. My thoughts.

[twest]

I have never posted but have been reading posts on this site for a year now. Love everyone's advice and input. I just wanted to share my experience with this. We bought a house with a loan for 60,000 and paid the mortgage off in 4 years. I am a firm believer in extra payments. Our payment was 500 and we just paid it like it was a $1000 payment. My DH and I only made about 65000 at the time so I just wanted to let anyone who is thinking of doing this know it is worth it IMO. I also felt we didn't sacrifice very much in order to do this. We are pretty frugal, but if we truly want something we will go get it. Now we have sold that house and upgraded to a home worth 160,000 and our current loan for the house is only 85,000 now. I am doing the same as before to pay it off as quickly as possible. We never did really receive any tax break on our interest so that was never a consideration for me. I have just always been that way about debt....never wanting it around any longer than it has to be.

Thank you all for your posts and advice. Love reading this site each day.

[twest]

I have never posted but have been reading posts on this site for a year now. Love everyone's advice and input. I just wanted to share my experience with this. We bought a house with a loan for 60,000 and paid the mortgage off in 4 years. I am a firm believer in extra payments. Our payment was 500 and we just paid it like it was a $1000 payment. My DH and I only made about 65000 at the time so I just wanted to let anyone who is thinking of doing this know it is worth it IMO. I also felt we didn't sacrifice very much in order to do this. We are pretty frugal, but if we truly want something we will go get it. Now we have sold that house and upgraded to a home worth 160,000 and our current loan for the house is only 85,000 now. I am doing the same as before to pay it off as quickly as possible. We never did really receive any tax break on our interest so that was never a consideration for me. I have just always been that way about debt....never wanting it around any longer than it has to be.

Thank you all for your posts and advice. Love reading this site each day.

[couchrobt]

I think it is ok that you pay more than what you have to. It gives us a feeling of security somehow that we will not lose what we have. My thoughts.

[TheMom]

We are paying ahead and should pay it off in about 6 more years instead of 10 more years. We're planning on using the money that was going towards the mortgage to finance college and by paying it off 4 years early, we'll have it timed better.

[Like2Plan]

We did pay extra on our mortgage and it was paid off a few years ago. It is a good feeling especially as I am fixing to retire.
In addition to paying extra all along, in the last year of our mortgage we transferred the remaining amount owed over to a zero % CC offer we received (back when they didn't have a transaction fee ).

[rj.phila]

Originally Posted by GREENBACK

This is precisely why I do not pay extra. I recently refied into a 4.3% 30 yr loan. I can certainly earn more than 4% in my retirement investments and I can retain a lot of liquidity with a very small mortgage payment. If a major, major emergency occurs it's good not to be tied up with a big mortgage payment or those extra payments made. Let the bank collect a little interest. You'll laugh at it in retirement with a monsterous nest egg. BTW, you'll probably be able to pay it off with the stroke of a pen.

My retirement investments earned around 12% last year. That beats the measley 4% paid to the bank any day. I'm just saying.

just to be clear, you picked one of the best net years in recent history as a benchmark. what would be a more accurate estimate is this: look at what products you hold, and look at it's average returns over the same lifespan you anticipate holding your mortgage. if it has beat your mortage rate, thats a promising sign.

here's where i think i diverge w/ the board status quo: holding a mortage at X rate while earning interest on investments at Y rate is essentially a gamble that you will have an opportunity for Y rate will beat X rate, consistently, over Z years. i RARELY see people quote actual metrics to support that the odds for this are in their favor.

remember, if you pay a minimum payment on a mortgage w/, say, interest that looks like 8k-7,5k-7k-etc progressively year over year, in the hopes to earn Y rate (assuming Y beats X, for sake of argument, and Z is term of loan), you just paid the sum of that interest as an ante of sorts for a bet that your investment rate vs. loan rate will come out ahead in the future.

in short, the question often comes down to whether you would rather lock into a future savings now, and pass up the chance to "out-earn" your mortage rate in the future, or realize losses on interest now for the OPPORTUNITY to out-earn your mortage rate in the future. for most people, this is the question they really should be asking themselves.

[TBH]

I round up a little bit every month, and when I have a windfall I usually put a little bit toward the mortgage. I really want to pay it off early. It weighs on my mind. However, I can't afford to meet all my other savings goals and make significant early payments on the mortgage.

I also am concerned about not ending up like a close relative of mine, who valued owning a house "free and clear" over other forms of savings. When she wanted to retire, almost all her assets were tied up in her house, and it took a long time to sell because the market had tanked. In the end she didn't lose too much money, but she had to delay her retirement while she waited for her house to sell.

What is "free and clear" about having all your eggs in one basket?

I would love to throw everything I've got at my mortgage. It is my impulse to do that. But I hold myself back, focusing on retirement, college and liquid savings. At the moment, I can't afford to do all that AND prepay the mortgage.

[disneysteve]

Originally Posted by TBH

I would love to throw everything I've got at my mortgage. It is my impulse to do that. But I hold myself back, focusing on retirement, college and liquid savings.

Same here. We have the means to write a check and pay off the mortgage but I'm not doing that. We're prepaying the mortgage as part of our overall saving and investment plan. We could do it faster. I've thought about doing it faster. I've run the numbers on doing it faster. So far, I've resisted. As the balance gets smaller and smaller, I'm sure we'll reach a point when I decide to just pay the remainder in a lump sum and be done with it but we're not there yet.

[moneyclass]

Yeah i always try to put extra towards my mortgage every month. trying to get this house paid for along with everyone else. i cant wait for the day its paid for and dont have to make that stupid paymnet anymore lol.

[jerrycates]

If you can afford to pay for in excess to principal, then it is much better. Why not? It is yours anyhow.

[PatientSaver]

I've prepaid every one of the 15 years i've owned my home, contributing an extra $400 a month when I could do so, and pulling back to no prepayments when i was out of work. Some years i only prepaid $100 or $200.

I'm not prepaying at all now becus I'm underemployed. But the balance is down to $30,000 and paying it off is my biggest and most immediate financial priority. It wouldn't pay to refinance such a small loan, so any prepayments is like a guaranteed 6% saving rate. Once I get rid of the mortgage, my day to day expenses will be much more manageable.

[SteveBlissLaw]

This is one of those things where I said I would.....but I never did lol

[Ronin]

I get paid biweekly so I do biweekly payments on my pay days, so it equals one payment extra per year. That's all I can really afford to do in between paying college savings, retirement, EF savings, and vacation savings. I get to deduct a lot of propert taxes and interest, so it's not totally bad having a payment... Better than rent! I still owe $226K though....