How do you determine the interest dollar amount savings when you make a early principle payment on a mortgage?

Asked By: MoneyTactics
Category: Mortgage Interest Calculator
Tags: amount, interest portion, mortgage industry, Principle, schedule

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Using 100k principle; 2 years schedule; 5% interest rate example, and assuming you make a 10k payment right on the first day, are you saving $417 (first month payment’s interest portion) or approx $108 (last few months payments’ interest portion)?

If it is the later, is it better to hold the money and then pay it off at the end when your outstanding principle is 10K?

Some banks may do it differently but what is the general method used in the mortgage industry?

To help, I am using this calculator …..

http://partners.leadfusion.com/tools/firsttech/home02/tool.fcs

Thanks!!!!

stan c
Posted 3 months ago

The best way is to request an amortization. It will give you a break down on interest/principle. On the first half of the life on a mortgage, you pay about 70% in interest.

Linda R
Posted 3 months ago

Try this calculator:
http://www.vertex42.com/Calculators/home-equity-loan-calculator.html
Download the spreadsheet for free (which is awesome by the way, kudos to Vertex for creating this and making it available for free).

Go to the “loan calculator” page, and you can enter an extra principal payment anywhere in the stage of your loan. You can also enter a consistent monthly extra principal payment, or any “what if” scenario you like.

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