can we pay of our loan quickly? will it reduce the intrest amount? if so how

Asked by Um2, Ellicott City, MD Sat Sep 4, 2010

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, ,
Tue May 3, 2011
Ellie-

I have been lending for 15 years and I spelled "principal" like "principle". ; )
0 votes
Ellie McInti…, Agent, Columbia, MD
Tue May 3, 2011
Ben. I stand corrected. I agree, the payment amount will not change but over the life of the loan there will be a decrease in interest paid.
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, ,
Tue May 3, 2011
If you pay off your loan quicker, it DOES reduce the interest paid on a P and I loan. Ellie, the reason your house is getting paid in 9 instead of 24 is because you are paying principle thus reducing the amount of interest paid over the term. What does not change is the PAYMENT unless you specifically ask your servicer to recast the loan.
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Ellie McInti…, Agent, Columbia, MD
Tue May 3, 2011
If you over pay a little every month you will decrease the principle and the length of time that you will need to pay on the loan. On a P&I mortgage it will not affect the interest as the full amount is amortorized over the life of the loan.
However, If you have an interest only loan then the interest will decrease as the principle decreases if you pay money to the principle.

In my personal experience I have always paid more money to the principle every month and now after 6 years of residency I will be paying my house of in 9 years instead of 24.
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Akil Walker, Agent, Upper Marlboro, MD
Sat Feb 26, 2011
Dear Um2,

The quicker you can pay off any debt, the better. I encourage my clients, if they can to make 13 payments in a year.
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, ,
Mon Sep 6, 2010
I would add that you could also consider refinancing. If currently have a 30 year term for example, you could refinance into a 15 year term. This would have your loan calcualted so that it is paid off in 15 years and you get a large interest rate reduction with a 15 year term. Interest rates are still near all-time historic lows.
Web Reference:  http://www.nickhomeloan.com
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Tammy Durbin, Agent, Mount Airy, MD
Sun Sep 5, 2010
I would call your lender ask if you can prepay your loan. Also ask them to send you a schedule to show how much of your pymt is going towards principle and interest. You could always send in an extra amount monthly or send an extra pymt a year. Just remember several financial advisors say you should pay off high interest credit cards and other loans before paying a mortgage with a low interest rate. http://kiplinger.com
has several great tools and articles on finance.

Tammy Durbin, e-PRO, GRI, SFR
Accredit REO Agent
Long and Foster Real Estate Inc.
cell 240-405-3118
Web Reference:  http://tammydurbin.com
0 votes
John Hurly, Agent, Columbia, MD
Sun Sep 5, 2010
good morning,

if your bank allows you to pay off your loan early without penalty and you have excess funds, it is a good idea, especially if you have been paying a while and your rate is above 4 or 5%

Once the loan is paid off, you pay no more interests. the big priority is to pay off the principal as quickly as polssible.

Check also with your bank, to confirm you could pay principal payments without penalty which would decrease your loan in years.

hope this was of help and if you need any help with your other real estate issues, let me know,

regards,
John
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Brian Pakulla, Agent, Ellicott City, MD
Sat Sep 4, 2010
Yes, if you pay your loan off faster, it will reduce the total interest you pay on the loan. It will not effect the actual interest rate, but since interest is factored on the principal balance, if you pay more principal it will pay it off faster and therefore less interest paid.

Congrats on paying down that principal!
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