I'm sure it depends on the mortgage, but generally speaking, am I understanding this correctly?
If you put extra towards the principal, your loan will end early and you will save the interest that you would have paid in the last x years that you got out of by paying extra. But if you put extra towards the principal in one month, my understanding is that your next month's payment still has the same principal/interest breakout that it would have w/o the prior month's extra principal payment, because most mortgages do not recalculate interest on a regular basis. In order to save any interest on that next month's payment, you'd have to have the loan recast. Is my understanding correct?
So I guess if you want to pay off your mortgage early, it is better to put the extra you'd put towards the principal someplace else safe (savings account) and then once your savings account balance is equal to the remaining principal on the mortgage, and then completely payoff/end the loan at that time?
Any insight is greatly appreciated! I'm trying to decide between a 15 and 30 year loan. I want to pay it off early just to be done, but with rates so low, it may behoove me to have the option to take 30 years...
If you put extra towards the principal, your loan will end early and you will save the interest that you would have paid in the last x years that you got out of by paying extra. But if you put extra towards the principal in one month, my understanding is that your next month's payment still has the same principal/interest breakout that it would have w/o the prior month's extra principal payment, because most mortgages do not recalculate interest on a regular basis. In order to save any interest on that next month's payment, you'd have to have the loan recast. Is my understanding correct?
So I guess if you want to pay off your mortgage early, it is better to put the extra you'd put towards the principal someplace else safe (savings account) and then once your savings account balance is equal to the remaining principal on the mortgage, and then completely payoff/end the loan at that time?
Any insight is greatly appreciated! I'm trying to decide between a 15 and 30 year loan. I want to pay it off early just to be done, but with rates so low, it may behoove me to have the option to take 30 years...