Can a 30 year mortgage turn into a 15 year?

[elcidd]

Make sure you write two checks

You're correct, as well as most of the other posters that have answered you. Having worked in the banking industry I have some uncommon insight into this though. The reason people take out mortgages and buy homes is because owning a home is one of the best ways you can increase your net worth. As you make payments every month the amount that goes on the principal (the actual loan amount) increases the equity of the home. That is the amount that the house is worth compared to what you owe on the loan. But the financial institution has to make money on the loan so from day 1 you will accrue interest on the total loan amount and for the first few years because it is a new loan you will see that the amount you pay in interest is generally much higher than what you are paying on the principal amount. However if you intend to finance the house with a 30 year mortgage at a lower interest rate than what you would have on the 15 year mortgage I would advise splitting the payment up every month. Pay the amount owed on the mortgage when it is due, then make a second payment sometime during the month and specify that the second payment be applied strictly to the principal amount. This will help you lower the principal amount more quickly and since interest only accrues based on your principal it will decrease what you will pay in interest over the life of the loan.

Agarlits is right about this. You actually will pay LESS overall if you follow this method. When paying your mortgage, make one check for the scheduled payment and make a SECOND check for your additional payment. Make sure you put in the memo, in big bold letters, "APPLY TO PRINCIPLE ONLY." Otherwise, they may credit the check to your next months payment (which is a combination of interest and principle payments). As you lower the principle balance of your loan, the interest against that loan is also lowered. This means that a larger portion of your regularly scheduled check will go towards principle as well further reducing the outstanding loan amount.

I would definitely consult the amortization tables to find out how much extra you need to pay to get the loan paid off in 15 years. But you may find that you will pay it off sooner.

Lionel

[feh]

If you want to pay ahead on your mortgage, there shouldn't be any reason to make more than one payment per month. Any amount over your regular payment will (should) be applied toward the principle. I mean, it has to be; there's no such thing as paying ahead on interest, since interest is assessed once per month.

We paid ahead on our mortgage, never made more than one payment per month, and never specified anything in the memo section.

[greenskeeper]

If you want to pay ahead on your mortgage, there shouldn't be any reason to make more than one payment per month. Any amount over your regular payment will (should) be applied toward the principle. I mean, it has to be; there's no such thing as paying ahead on interest, since interest is assessed once per month.

We paid ahead on our mortgage, never made more than one payment per month, and never specified anything in the memo section.

depends on your loan document. There could be penalties for paying early/additional, etc.

[snafu]

We followed elcidd's system [2 separate payments with clear demand 2nd payment be applied directly to principal] and paid off a 30 year mortgage in a tad over 12 years. If you plan to re-finance to lower the interest rate, check to make sure there are no fees or extra costs associated with the process. As I understand it, re-financing resets the ratio mortgage: principal increasing the interest portion and lowering the sum to principal. With rates so low this might be moot.