I am trying to figure out which of these scenarios will have the greatest effect and by how much. Option 1 is to make a additional 12k payment on the principle and make the regular payments for the rest of the year or Option 2 is to make a additional 1k payment on the principle each month for 12 months and make the regular payments. So at the start of the second year where am I at and how much did it take off the back end of the loan? If anyone knows a good mortgage calculator that can help me figure that out I would appreciate it. Thank to all that answer J
Making that last payment on some real estate is a fantastic feeling. There's nothing like being debt-free.
There was a news report out in las vegas about paying off your house is 7-12 years using a HELOC. It striked my interest and been doing research on it. Been debating with a co-worker about it. His arguement is that your not saving anything and are losing since your borrowing at higher interest rate to pay down a lower interest rate. My arguement is that if you make a large payment on principle like 10k the amount it saves you in the back end of the loan is HUGE compared to the interest you pay on the HELOC. Seems the difference between the 2 is about the same with all things being equal and how you run the numbers, but life would seem a little more forgiving if you use the HELOC. I am almost 32 and just had my loan for just over a year, seeing the savings I can do with the powering down the principle, I am setting myself up with a goal to get my house paid off by the time I am 40. Crossing fingers
" I am setting myself up with a goal to get my house paid off by the time I am 40." Kudos. I paid my house off probably around when I was 40. Then mid-life crisis takes hold. Making money want bigger, better yada yada. I have an excellent location so I ripped most of the house down and built bigger and better, whoa, it'll be a bit tougher to pay off this mortgage, and really, who needs the extra aggravation that comes with the bells and whistles. Oh well. My Dad did the same thing, pays off house then built a new one, He used to complain about his new mortgage all the time, and I swore I never would fall into that trap, history repeats, man it would of been nice not to have a mortgage about now.
The key is to remember that a fixed mortgage is amortized, so the sooner you pay off the principal, the better. In OP it would be better to pay an additional $1000 per month, which goes directly to principal. You would be surprised how much quicker you will pay off a mortgage by just paying a few hundred extra per month.
Calculator wont help because we dont have the terms. You have to make the regular payments so nothing about prepaying affects that monthly obligation. Prepaying the 12K now (1) retires the loan fastest and (2) has the greatest effect in interest savings compared to the other option. Good for you BTW.