When making a Mortgage Loan Prepayment, does it reduce the principle amount you have to pay each month?

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Currently I am about to close on a house and have a 30 year fixed rate mortgage. My question is whether paying additional amounts above my normal mortgage payment reduces the amount I will have to pay each month, or whether it just reduces the amount of periods in my loan term.

8 Comments
  1. Reply
    pearlmel
    February 2, 2011 at 4:06 pm

    yes

    here is one example on 150 k 30 yr fixed with a 6.5% rate
    first i must say you should make an additional payment and mark on check “apply to principle”! this way you have proof and there is no question your intention!

    ok 150k home making a 150 extra payment every month!

    pays your home off in 21 years and a 9 months

  2. Reply
    mazziatplay
    February 2, 2011 at 4:30 pm

    Principal reductions do not impact the monthly payment unless your lender allows a modification of mortgage and they usually only do these in the case of a one time large payment not on amonthly basis.

  3. Reply
    BaByOnThEwAy
    February 2, 2011 at 4:57 pm

    No, if you pay more than your amount for the payment each month, it does nothing to reduce your payment, but if you do that each time, your morgage can be paid off sooner. Probably knock off a year or two. But you would still have to pay a payment each month, so even if you pay WAY over your monthly payment, make sure you have enough to pay for the next month cause, if you dont, you’ll get a past due statement, and thats not good.
    -loan processor for a credit union! = ]

  4. Reply
    shamieya
    February 2, 2011 at 5:56 pm

    No it will not decrease the amount you have to pay each month, it will increase the amount of principal you pay each month and you end up pay off the principal faster, thus decreasing the life of your loan.

  5. Reply
    Tami
    February 2, 2011 at 6:12 pm

    No, I’m sorry it does not.

    What happens is you need to SPECIFY that you are making a principal ONLY payment when you send in your regular payment.

    When this happens the amount of monies you have requested gets taken away from the original loan amount and the BANK LOSES THE INTEREST for that amount.

    The banks sets all new loans so that the first 15 years or so most, if not all, of your payment is applied towards interest only on your loan. Towards the end of the loan period after they have received the specified interest more is then taken off the principal (your original loan amount).

    It is a very wise idea to make PRINCIPAL ONLY payment. Please be sure you do not mistake this with additional payments because what you are trying to do is reduce your loan amount not keep given the big guy more of your hard earned money.

    Additionally, there are services out there that you can make your payments in a bimonthly fashion (this stops having to come up with such a huge amount once a month which for many can be hard) When you do bimonthly payments this also at the end of the year takes monies off the PRINCIPAL.

    There are so many choices out there – your already showing great intelligence just by asking others who have been through what is the best way.

    HAVING WORKED FOR SEVERAL BANKS – I KNOW WE ARE NOT ALLOWED TO BY LAW TO HELP YOU WHEN WE SHOULD WE ARE SUPPOSED TO PROTECT THE BANK AND OUR JOBS BUT HEY THEY DIDN’T DO THAT WHEN THEY MADE ATM’S DID THEY.

  6. Reply
    aiownk
    February 2, 2011 at 6:22 pm

    When you make additional mortgage payments, those amounts go entirely against your principle. This will reduce the number of payments you will eventually have to make. So, in the example of a 30 year fixed mortgage, if you make just your normal (fully amortizing) monthly payment, you will end up making 360 payments (12 payments per year for 30 years). But if you make extra payments, you will reduce this number and you’ll save on interest to boot!

  7. Reply
    Carolinahomerates.com
    February 2, 2011 at 6:48 pm

    No. ONLY INTEREST ONLY MORTGAGES are impacted

    when additional money is added to the monthly payment.

    If you make extra payments to a 30yr fixed mortgage it will

    only cut the term of the mortgage.

  8. Reply
    Jessica
    February 2, 2011 at 6:58 pm

    Make sure you call the bank and have them apply the addtl pmt to the principal. this will not reduce your monthly amt, just the time on the loan.

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