Forgotten Your Password?

Need to Register?

Question Icon

If I pay extra on my principal, will my mortgage term get shorter automatically?

by glen.hankett412 from Costa Mesa, California. Jun 23rd 2016 Reply


Crestico Funding (CresticoFunding)
#287 ranked lender in California - 336 contributions

Hello Glen,Yes, every time you make an extra principal you are reducing your mortgage term life, generally speaking if you make one extra principal payment a year a 30 years mortgage should get paid off in 25 years.

Jun 23rd 2016
1
0

Yes your term will be shorter but your regular mo they payment doesn't change as your principal goes down. You'd have to refinance to accomplish that.Ron949.514.1761

Jun 23rd 2016
1
0
Jericho Cherry (Jerichocherry)
#58 ranked lender in Virginia - 1,107 contributions

The simple answer is yes.

Jun 24th 2016
1
0
Lynda Mckenzie (Lyndamck)
#9 ranked lender in Rhode Island - 33 contributions

Making additional principal payments on your mortgage, does shortens the life of the loan.According to BankRate.com, "making a smaller additional principal payment each month may result in slightly more savings compared to making a lump sum payment once a year. But the difference is close enough that you should take the approach you're more likely to stick with over time".I suggest you use features on Bankrate.com mortgage calculator to try different strategies to shorten the loan.

Jun 24th 2016
1
0
Dan Paladin (dpaladin)
#1 ranked lender in California - 433 contributions

Yes...extra principal payments will reduce the term of your loan thusby saving you money on interest paid.

Jun 24th 2016
1
0
William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,933 contributions

As others have said, yes.. the term will be shorter.. however, if you talk to most all financial planners, the general consensus is "Cash is King".. and most all will tell you that paying extra towards a mortgage is not the best use of your extra funds, and it's also not secure.. Let me explain.. Most mortgage rates today are below 4%.. yet, with relatively save investments in mutual funds or bonds, you can make as much as 8% to 12% returns.. so the advise would be to put your extra funds to work in a brokerage account vs. into your mortgage.. As far as the mortgage goes, it does not pass the test for a safe investment.. If you have a 30 year mortgage and you pay it down to where you have 36 months left and several hundred thousand dollars in equity, and for some reason, you get sick, lose your job, or are otherwise unable to work, and you don't have the money for a mortgage payment, then you can lose your home.. there are no conforming loan programs where you can get financing if you do not have verifiable income.. This is why paying extra towards a home is not the wisest thing to do financially.. This all being said, Susie Orman says that even though it makes no financial sense to pay off your mortgage.. for some people, the relief and security they feel by having a paid off home is worth it to them.. if this is you, then by all means, pay extra.. Also, some people are more disciplined than others when it comes to saving money, and if this is you, then by paying extra towards your mortgage is better than doing nothing.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Jun 24th 2016
1
0
Larry Gray (lgray_312_247)
#566 ranked lender in California - 1,127 contributions

Each person's situation and level of comfort are different. You have received good answers thus far. If you desire to pay the principle down you absolutely can and shorten the term. Many people who considered a 15 year or 10 year term selected a 30 year term because if something happened to shorten their monthly income they did not want to be stuck with a mandatory higher monthly payment. Thus, with discipline, many homeowner's add to the principal they pay down and thus shorten the loan to a 25, 20, 15 or 10 yr loan...even though they have a 30 yr. term loan.

Jun 24th 2016
0
0
Subscribe to our news feed.