Steve gave you some good information. And, of course, you do need to check with your lender on exactly how they handle principal reductions.
On the other hand, if you are a numbers person and want to know the dollars and sense (I mean cents) about it, here is a quick recap. Based on an interest rate of 5%, if you make one extra payment per year, at the end of each 12 month period, you will pay off your 30 year mortgage at approximately year 25 and 4 months. You will save approximately $16,350 in interest on every $100,000 borrowed. So if you plan to stay in the house the rest of your life this makes sense. You have saved both time and money. Of course, the situation changes based on your plans. And, this analysis does not take into account any changes in your income tax liability. For a complete analysis the benefits of making extra principal payments, check with your tax and investment advisors. Good luck on your new home purchase and Dare to Dream.
Shel-lee Davis, QSCÂ®
Certified Distressed Property Expert â€“ CDPEÂ®
Short Sale & Foreclosure Resource â€“ SFRÂ®
Certified HAFA Specialist â€“ CHSÂ®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty