# How does mortgage prepayment affect future amortization? I’d like a spreadsheet?

Deal Score0

I’m about halfway through a 15-year, fixed-rate mortgage. I have an amortization schedule from when the loan was originated. I would like to see how irregular prepayments to principal affect the amortization going forward. About \$ 200 of my monthly payment goes to interest right now, and declines slightly by month. If I pay down the principal by, say, 5 thousand, how much of my future payments will then get divided between principal and interest? A spreadsheet would be great, if anyone has one.

I found this on the website for the mortgage… (Prepayment Fee: For fixed-rate loans, the following prepayment fees apply to any payment made in excess of the fixed payment schedule: 3% of prepaid amount for year 1 & 2, 2% for year 3 & 4, and 1% for year 5 and beyond). so can anyone show an example how it works ?

In addition, if I have certain amount of money, should I go ahead and pay for half of my mortgage ? would it reduce my monthly interest if I do so ?

mark
January 29, 2011 at 10:36 am
zeuz
January 29, 2011 at 11:04 am

It’s an easy exercise to set up the spreadsheet you desire:

Column A – Month/Year
Column B – Payment
Column C – Interest (= monthly interest rate x last month’s balance)
Column D – Balance (= last month’s balance + interest – payment)

For the first month, keep everything blank except the balance.

SmartA\$\$
January 29, 2011 at 11:36 am

Here’s a loan calculator that works in microsoft excel.

krennao
January 29, 2011 at 12:33 pm

Do you have a mill or insurance rate you have to add with that payment?

January 29, 2011 at 1:32 pm

It may or may not reduce your interest if you pay down half. If really all depends on your credit score. Although some bank may consider you a lesser risk if you pay down that much.

matzael
January 29, 2011 at 2:07 pm

It’s simple. If your payment is \$ 1,000 and you decide to pay \$ 1,500 with the extra \$ 500 going to principal then it’s just 3% of \$ 500 or \$ 15 (depending on which year you’re in). If you pay half your mortgage that’s probably going to be a huge fee.
Paying half of your mortgage off now would absolutely reduce your monthly interest payment and pay your loan off quicker. What you have to look at to see if it’s a good decision for you.
1. How much are they going to charge you for paying that much now?
2. How much is that going to save you in interest in the next few years, versus waiting until the pre-payment penalty expires?
3. In the long run..how much interest will that payment save you versus how much would you receive for investing that money somewhere else? (figure this out with paying the pre payment penalty and also with waiting for it to expire to pay this amount off)

If you have a safe amount of equity in your home, I’m a big fan of investing the money in a retirement account that gives you a tax benefit. That’s assuming that you don’t have enough set aside for retirement (most Americans don’t).
That way you get 2 tax benefits from the amount (mortgage on your home is probably a tax deduction for you also), as well as the interest from the retirement account option to offset the cost of the mortgage. Granted this only works if you have a fairly good deal on your mortgage and enough equity where you could get out of the home if you had to. Once you have enough equity where you’re comfortable then it’s time to see where else you need to invest your money to reach your long term goals.

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