Comments on: A Look at Mortgage Payments

By: Stephen

Stephen — Thu, 27 Mar 2008 17:21:51 +0000

How can one directly calculate the crossover point when the amount of each monthly payment that goes toward the principal is approximately equal to the amount of each monthly payment that goes toward interest? How can this crossover payment number be directly calculated. On which payment number does the crossover occur?

Thanks for the great web site.
- Steve Gibson
Atlanta, GA
678-778-6790

By: JLP’s Roundup—AllFinancialMatters

JLP’s Roundup—AllFinancialMatters — Wed, 20 Feb 2008 22:31:42 +0000

[...] Nickel talks about the mortgage crossover point, which is the point where more of your mortgage payment goes to pay principal than interest. – I wrote about this topic quite a while back if you’re interested. My post even included an interesting graphic. [...]

By: Me Myself And I

Me Myself And I — Fri, 22 Jun 2007 18:08:41 +0000

I like to see 4 points for a mortgage:
1) “Half-way” point – where you’re paying more toward the principle than you are toward interest with every mortgage payment.
2) Total Principle paid versus Total Interest paid
3) Total Principle is half of what was originally borrowed
4) Term (when the loan is paid off of course)

Our 15 year @ 5.5% shows the following (as someone else mentioned, the amount borrowed is irrelevant):
1) 30th payment (2 1/2 years)
2) 57th payment (4 3/4 years)
3) 109th payment (9 years 1 month)
4) 180th payment (15 years)

John W.:
I can’t imagine having something spelled out in the mortgage that stated you were limited in the amount you could pre-pay. I asked our loan officer (and of course double-checked the mortgage itself), and there is no such pre-payment limitation.

Claire:
I wrote a small application that handles amortization scheduled and pre-payments, and adjustable rates, on top of a few other financial calculations. I still need to do some work on the graph though. But, if you want, I could e-mail it to you, just send an email to me: “cc_mynews at comcast dot net” (of course you’ll need to change the “at” to “@”, and “dot” to “.”)

By: John W

John W — Wed, 16 Aug 2006 13:20:41 +0000

From the land of mortgage brokering, yes pre-paying or doubling payments does save you both in time and interest paying out the mortgage.
Beware however, the limit to prepaying is usually spelled out in your mortgage contract. Most lenders I deal with limit the pre-payment to 20% (in case anyone wins the lottery).

As to the comment, is it better to prepay or invest? That depends on what you are able to earn with the money you planned to prepay. Will you get greater than the current posted rates at the bank? Yes, invest it. You are a head of the game.

From an investors point of view, invest it in a rental property and have the tenants pay for the mortgage. This is termed “good” debt. Leveraging the banks money, have someone else pay for it and you end up with the asset at the end of the term (and potentially retire off this net income).

By: curious

curious — Thu, 27 Jul 2006 07:05:19 +0000

One definitely saves interest by prepaying. However, the part I am confused about is that is it better to prepay / invest?

Or in other words: Do the lost tax benefits and lost opportunity costs (by prepaying) counterbalance the saved interest?

thanks

By: fivecentnickel.com

fivecentnickel.com — Sat, 27 May 2006 04:23:07 +0000

Weekly Roundup – 05/26/06

Here’s a quick look at what’s been going on around the MoneyBlogNetwork and beyond over the past week…

FreeMoneyFinance highlights a list of ways to protect yourself against high energy prices.
ConsumerismCommentary advises you to c…

By: claire

claire — Thu, 25 May 2006 16:34:09 +0000

Wow, that’s crazy. Two thirds of the way through before you’re paying yourself more than you’re paying the bank.

I’m SO GLAD I stretched a bit and got a 20 year loan instead of 30. And I also prepaid $1000 in the first year, so hopefully my chart looks a little better than the one above. I know, I know, I should have put that $1000 in a retirement account. But the psychology of money is such that sometimes you don’t do the smartest thing.

By: JLP

JLP — Thu, 25 May 2006 04:30:35 +0000

Nickel,

Yeah, you’re right. I skipped a number and that threw everything off. Thanks.

By: fivecentnickel.com

fivecentnickel.com — Thu, 25 May 2006 04:03:34 +0000

I think the right hand column in the last row (10% interest) is a typo. Isn’t it? How could the percentage of payments drop so dramatically when the rate goes up?

By: Garrett

Garrett — Thu, 25 May 2006 00:11:10 +0000

You can look to get into a mortgage with an Equity Builder. A loan with such can cut into the loan faster because it is basically accelerated. The interest rate may be higher, but the difference in interest rate is negated by the extra payment going directly to principal. You can do this by paying a normal monthly payment instead of extra $$$ that can otherwise go into a savings/retirement vehicle.