Extra Mortgage Payments - Monthly vs. Annually
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- เผยแพร่เมื่อ 26 ก.ค. 2024
- In this video, I will show you how much money you can save by paying off your mortgage faster. Is it better to pay a little more every month, or should you pay a lump sum once a year?
Below is the link to the website I used during the video:
www.bankrate.com/calculators/...
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Paying off my mortgage early was a pivotal financial move for me. By strategically allocating extra payments, I saved thousands in interest and freed up cash for more investments. It's about optimizing your finances and making your money work for you. Financial freedom is within reach for anyone willing to take the right steps.I wasnt financial free until my 40’s and I’m still in my 40’s, bought my second house already, earn on a monthly through passive income and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your futuree.
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Nice. Showing it with math is super helpful
Glad it was helpful!
Thanks for the video
You bet
I’m paying 200 extra and I’m planning to add a yearly lump sum before the summer. Hopefully I see it go down quick.
The key is to be consistent. If you can continue the extra payments, it will greatly reduce the amount of interest you'll pay by the end of your loan.
@@TheSmokingBeard oh yes I plan on it. I am lucky to have a job that pays lots of overtime. I want to hit it hard.
Thank you
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Thank you for an informed video
No problem
i have a FHA loan 4.75 interest i just started giving 100 or should i start giving 200 i can affort it wat should i do
If you can afford it, you could do that or... if you have other loans (auto, credit cards, ect...) you could pay those off first. Start with those with smaller balances and work your way up. As you pay those loans off, you can add what you were paying to your FHA loan. Kind of a Snowball effect.
thx i still new at this and need alot of explanation
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Umm sorry if I missed it but what is the website
Here is the website for the one I used in this video... www.bankrate.com/mortgages/amortization-calculator/
Website doesn’t let you enter a term > 30 years.
Ok
Here is a video I just uploaded with a different website that will let you go as many years as you want.
th-cam.com/video/JaH0bAIB0XE/w-d-xo.html
Great video. I got a situation. I got a owners finance home. I bought a house back in May of 2015. Loans is for 13 years. I made regular payments for 4 years. On Jan of 2020, I made a lump sum payment of 10K. then on April of 2022, I made another lump sum payment of 10K. Both time the owner put the extra lump sum at the end of the amortization period. He stated that on my legal house documents it stated as to where the lump sum was going to. I thought the lump sum payment was going to be applied at the month i made the payment. Does this sound right?
Nope that sounds very shady to me. What he is basically doing is applying your payments towards your payments and not your principle. If he were to apply it towards your principle directly, you would have saved the 20K plus all the interest that goes along with it. By applying it as "future payments" he's charging you the interest you would have paid as if you would have made those payments on a month to month basis. In this situation, you have to make sure that this is what it stated on the contract. Have him prove to you that this is true. If it is ture and it is in the contract, either refinance with a finance company that will not penalize you for early payments, or do not give any more extra payments since the whole point of giving extra is to save interest. If you can not refinance, I would use any future money you have available and pay off other debt that is charging you interest like credit card payments or car payments. What he basically did if he included this in the contract is guaranteed himself not only the selling price of the house, but also all the interest that comes along with it. Like I said... very shady. You will get those type of seller friendly contracts when you owner finance. If you were to give me your exact numbers, I could tell you how much you would have saved if he were to apply it towards the principle instead of what he did. Let me know. Thanks.
Hi shouldn't that have been 30 years on the last 1 not 25 years
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Why paying the lump sum once a year will extend the time by 1-month than paying monthly payments?
Because you are allowing the interest to accumulate for 365 days before paying down the principle. By paying it monthly, you will carry a lower principle balance which in turn will lower you interest paid.
Also if you paid the 1 time annual up front instead of waiting 12 months to do it you’d save more time than the monthly. This vid is only showing if you pay it at 12 months in instead of the first one up front
If I give extra 100 I should be specific towards s interest or principal?
That depends on when you make the extra payment. Usually when you send the extra money along with your normal monthly payment, it automatically goes towards the principle. If you decide to give the extra payment at a different time, they will see it as partial payment for the next month. It can still be applied towards the principle if sending it at a different time, but for this you would have to specify that you want it to go towards the principle. The best thing to do would be to send the extra payment along with your normal payment. You can always verify when you receive your next month's statement to see if it was applied correctly. If not, you can always call and tell them they applied it wrong and they should be able to go back and fix it.
@@TheSmokingBeardohhhhh. So I don't have to refinance in order to pay a lump sum towards the principal if I just add an extra 500$ or 10,000$ or 50,000$ to my monthly payment it will go towards the principal and not the interest is what your saying? My loan person told me to save my money then refinance then put the money down
@scaletechhelp4585 As long as you send the additional money in at the same time with your monthly payment, it should automatically go towards principle... that is how most traditional loan work. I would call your finance company and ask because sometimes they take the extra money as an advance on future payments. It has happened to me before that I'll send an extra $200 in the middle of the month and they apply it to my next payment instead of towards the principle. In this case, all I had to do was call in and tell them that the additional money sent in was meant for the principle. As far as saving up to refinance, you would save more money on interest applying it towards the principle than it just sitting in your checking/savings account. Keep in mind that the way they figure your interest for the month depends on your current loan amount. The sooner you can bring that amount down, the less money you'll pay in interest each month. Never refinance unless you are shaving years off your loan or getting a better interest rate. Keep in mind that when you refinance, there are other cost associated with it.
@@TheSmokingBeard just looked so on my mortgage portal I can choose to pay towards principal escrow or mortgage it's self. So I went ahead and put a 1000$ towards the principal as extra and also increased my monthly pay by 53$ because it said on the portal with their calculator it would save me like 2 years paying that small extra.
@scaletechhelp4585 Yes... keep an eye on it. The more money you put down towards the principle, the more money you'll save in the end.
Thank you, I wish they taught this in schools. Very helpful 👌
Thanks
Great video, thanks for sharing this with us. Your scenario is applicable if you have the $1,200 at the beginning of the year, but if you just bought the house and are left with 0 money to contribute the lump sum of $1,200, it would be better to start adding the extra $100 monthly rather than saving that money to do a lump sum of $1,200 at the end of the year.
Yes. It's alot more affordable to do it monthly. Also, the biggest difference you will see in interest savings is at the beginning of the loan. The sooner you start, the greater the impact
I pay extra each month but occasionally while out running errands I walk into the bank and hand in my pocket change to go towards the principal. I know that will not do much in the grand scheme of things but it is always fun seeing the bankers face when I hand over a couple crumpled dollar bills and loose change and tell them I'm making a payment towards the principal.
Nice