How Do Principal Payments Work on a Home Mortgage?
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Bought my house in 2013 and it'll be paid off next month!
100% debt free at 31 !!!
So....how does it feel? I sincerely hope COVID-19 did not throw a wrench in your plans. Enjoy your financial freedom! We'll be done with baby step 2 next month and after we get our emergency fund fully stocked up we're going to attack the principal on our house with a vengeance!
@@rangerfan1868 thank you! Yup I paid off my house! It feels great waking up knowing you don't owe anything to anybody! And no, covid-19 doesn't effect me as I'm an RN. Yes, keep throwing anything you can at the principal of your house! Keep it up!
@Craig Wallace thanks!!!
dsmdriver2588 Thatâs great
Congrats!!! What a great feeling you must have can't wait to feel that way some day too!!! đ€
Dave Ramsey's insights have been a game-changer for me! His practical approach to financial management has empowered me to take control of my money and work towards a debt-free life. The Total Money Makeover is my go-to guide, and I appreciate how he breaks down complex concepts into easy-to-follow steps
I refinanced in August a $122K mortgage from 4% to 2%. I got a part time job (doing something I love to do) and am using the entire paycheck to pay down principal each month. Will be mortgage free by January of 2023.â€ïž Weâve never had car payments and pay our credit card off each month. We taught all of our children how to live frugally and save for the future. Now we are teaching our 2 grandsons those same lessons. Weâre both 68 and healthy. Thanks for all you do Dave!
That's awesome work you did and you're sitting pretty now!
Inspiring thank you
Susan how is that mortgage looking for 2023đđ
WinningâŠ. â€
Checking in.. you're one month out, how you feeling about owning the house?
Never take a home loan that penalizes you for making payments early or paying extra payments.
common sense lol.
Are US banks allowed to offer you loans without the ability of making early payments?
That is a regulatory requirement for any loan in the European Union.
Mine has early pay off penalty, but it's still worth paying off early.
Unless that mortgage has worthy pros.....
Or any loan for that matter.
I paid off a 30 year fixed mortgage in 11 years by paying extra on the principal every month
inkey2 how much did you pay monthly
That's a major goal.
I made principal payments at 1/2 of my monthly mortgage payment ($400.00) each month on the 15th. Paid off my first home in 10 years, sold it, put 45% on my current home. Paying $600.00 each month on my current home. Now, I don't purchase new clothes, don't drive a new car, don't eat at Fast-food places, refuse to shop at Walmart/Target/Hobby Lobby/Home Goods---it requires discipline but it's worth it.
ethiopianabesha why would you not shop at Walmart? Thatâs one of the cheapest places for goods
Sam The Kings Fan Walmart sucks. They only want you to believe its cheap, but allot of the times its not even close to cheaper. People are so brainwashed into thinking Walmart saves them money they donât even think to do their own research.
This man changes people's life
For the better.
Indeed! God bless Dave and Crew!
I was a senior accts mgr at a major bank for over thirty years and never saw these principles explained better than here.
We were all taught these facts during High School Economics classes, but at age fifteen, we promptly forgot them, lol
I paid off my 30 year, 4.25% rate, 5 figure condo mortgage in 12 months, put every every spare penny, roommate money, and killed my savings to do it but it is worth it.
mudhudgie95 keep emergencies fund tho
@runbear Technically he could have, but each investment is a risk and requires extreme discipline whereas paying quickly a mortgage gives you huge, and safe savings.
@runbear Yes, that is hind sight though, He could have lost money. Paying off debt is NEVER a "bad move". No investments are a "sure thing".
Just imagine all the money you just saved and can invest/emergency fund
Technically no, it is tied in the house. So to access it would cost you. I guess I don't get the pay off the 3-4% mortgage (this is 3-4% locked in for term of loan even if rates go up, inflation takes off etc, that is good for lender)... meaning 7yrs down the road you are paying with future dollars (inflation figured in), while investing in stocks and bonds which historically after inflation are paying 6-9%). I think paying the mortgage off 1st vs investing 1st is a mistake (assuming all other debts are pain, student loans, vehicles, etc etc). Time value of money... you can't get back 10yrs worth of double digit growth in the stock market. Use "good" leveraged debt = home/business to grow exponentially with a 20-35yr timeline
One part of the discussion needs more explanation, and that was that when more goes to the principal, it means the loan gets paid off earlier and you pay much less interest in total. So if you had 100k loan for 30 yrs at 3%, your payments would be $421.60. The total interest on the life of the loan would be $51,165.87. Now let's say the FIRST MONTH you paid an additional 10k. This works out to paying off your loan *54* months earlier!!! It would also save you almost $13k over the life of the loan.
In fact, if you paid only $50 additional/month, that loan would turn into a 303 month loan rather than 360 mo loan, and you would save $9k of interest on the life of the loan.
Magic of compounding interest!
@larrybud power of *amortizing* interest.
The compounding interest is calculated ahead that's why if you pay more than the minimum amount you save on future interest. I might be wrong though but, that's my layman's understanding of ammortisation
We keep our monthly amortization schedule for our mortgage printed out and on the fridge. I LOVE crossing out multiple lines every month...just a few more years until we can cross that last line (originally dated for 2042!!!!!) off!
I do the same:-)
Robyn Rosado Do you have to make the schedule yourself? Or do they give it to you? Buying my first house in a couple months lol
Robyn...That is such a great idea!!! Thanks for sharing
Wow, I'll do the same.
I love this idea. Thank you!
I keep my amortization schedule handy and I mark on it every payment we make. Since we always pay extra it's awesome to watch how much we save on interest and how fast we are progressing through it
"Oh OK" This is the very stuff they need to teach in school. 1984 my first period class was Economics. Later in life I would compare my mortgage statements. It was like a drug to make those extra principle payments. I have paid off two houses in my life. Nothing beats that feeling.
I like making my extra payments weekly, not because of any special math but more psychological. Similar to how paying off smaller debts first boosts your confidence to keep going, I want to make sure that as soon as payday comes I make the extra payment. Once I'm more disciplined with time, money, scheduling I can change that up.
Im doing the same $100-$150 a week so far so good I started this month
"ok so... 1 I just have like a pretty weird personality so i might get all crazy here..."
What an intro lol
5:27 so true! I've been saying this for the longest time. They don't teach you what you really need to know as you're going through school. no disrespect to Shakespeare or Trigonometry, but teenagers to learn as early as possible about principle vs. interest, balanced budgeting, and interest rates. These are the things that will truly affect them the rest of their lives.
That's because Big Business thrives on incompetent people that spend more than they earn.
Codithejedi The government too for that matter.
So true. We also wouldnt have a national student loan problem if kids really understood how money and life works. Knowing how to manage money makes life simpler.
Dani P But of course the government and huge corporations rely upon the ignorance of the general public. That's how they make money.
My junior high had a class that taught basic financial things, like doing taxes, filling out a resume, getting a mortgage etc. However this was an elective class, not a core class like it should have been.
I got my home paid off in 11 years due to lowering my ammortisation period to 12 years as well as doubling the payments.....I saved myself at least $60,000 in interest to the bank.....I also slammed the mortgage with yearly over payments.
It would indeed be nice if more practical things were taught in school. It also might work if PARENTS taught more of those things at home.
Parents have to know it first to teach it haha.
In a perfect world the parents would also be perfect, but that's not the world we're in. So as a society if you want a better society we need to take care that the youngest are getting the best we can give them. I know people with kids who should never be parents, but they are and we allow it.
Maryann Anderson gefhhsegsedgt
Maryann Anderson Absolutely
This is common sense
a year ago , all this info would be a different language. Now it's second nature. Thank you Dave
AllinTMC Does anyone know why my principle payment keeps going up?
@@jameliarabsatt4954 it might be a variable rate mortgage, should have made sure it was fixed rate
THIS MAKES SENSE! Thank you caller for your question, and Dave for your explanation!
Dave Ramsey has gotten me out of more debt!!!! I just want to say thank You Dave!!!!
please please stop this nonsense!
Dave didnt do anything. YOU did!
Dave paid your
debts? đ
We are down to $128k! Can't wait till we finally pay off the house!
I Should Know This how did you do it? Can you share it? How you did.
Yo, can we get an update?! How are you doing?!
Wow!
@@Sesshyru No update, probably foreclosed...
Boss Moved and sold the house for $100k in equity for better school for the kids. Planing on building a house now with the equity.
be careful, some banks will take your extra money as normal payment and say you good , your ahead on paymens. Say no, I want that towards Principal balance
Will they do that with a mortgage? I know what you are talking about. I had a credit union do that to me on a small personal loan, but I didn't know that they would do it with a mortgage
You need to write âtowards principleâ
On the check
Yep, you need to make a separate payment that is marked âapply to principal â.
If they have an online option do it that way. You can allocate where your overpayment money goes.
My student loan servicer says they can't apply a payment only to principal. You must pay off any interest at time the check is cashed and sometimes by the time the check is cashed it can't only be applied to principal - therefore they void the checks because they can't follow the special instructions. What you do is say "do not advance due date". Mortgages probably don't have the same issues since the interest is calculated monthly rather than daily with student loans and as long as your additional payment is applied the same month as the interest payment you can probably get away with "apply to principal". But I would expect some slimy banks to void "apply to principal" checks on the same grounds as student loans so they can make an extra buck.
I was today years old when I finally understood how my mortgage interest works... even after my husband trying to explain it a dozen times. Thanks, Uncle Dave.
The big secret about home mortgages is the fact that banks will allow you to get into a 30 year home mortgage with a relatively small payment amount so that you can buy a lot of house compared to your salary (or buying power). BUT, that small payment is all interest, and almost no principal. So think about that; since you are paying so little in principal on your monthly home mortgage payments, you just don't make any progress on paying off your house, and so all your payment money is going to the bank and NONE of it is going towards your house. With this kind of loan, it take nearly 10 years before you've made any progress in the interest to principal balance of your monthly payments. It is the biggest legal rip off on earth. That's why Dave suggests a 15 year mortgage for the same priced home, where the early monthly payments actually do make you some progress in paying off the principal. The alternative for those with a 30 year mortgage is to use any extra money to make additional payments towards your home mortgage, instead of saving it or investing it. To see the wisdom here, do some simple math. One hundred dollars of extra payment on your mortgage in the first month will save you paying three percent on that same one hundred dollars over the next 30 years. That's $3.00 a year times 30 years = $90. That's a 90 percent return rate over 30 years, guaranteed. And that's at 3 percent, not too many home mortgages are out there at a fixed 3 percent, most vary, which means your return on that $100 might be much more.
Speaker Builder Why commit to a house you can't afford. Fifteen year mortgage is not necessary if you apply money to your principal. The problem is people do not know how to manage money and understand what you are signing.
I think it also depends where you live. I'm in Toronto and there are 0 homes for under a million. The average wage is still the same as everywhere else, however. If you want a house at all you must take a very long term mortgage or figure out a way to make hundreds of thousands a year to get a shorter term one. There really isn't any other option.
Speaker Builder you need to annualized your interest paid then compare this annualized interest paid to annualized the opportunity cost of interest you could earn investing those same moneys.
Speaker Builder Same $100 over a 30 year 3% compound interest will yield you $243 and with 10% annual returns will yield more than $1700
@@rajeshpurushotham430 What do you mean compound interest?? Where are you putting the money?
At our HS the money class was to practice finding an apartment or a car to buy, how to write a check. No real advice about how to pay for it all đ
Mrs. T is Going Debt Free Mine was the other way around-how youâre going to pay for it, but not what to look for
They taught us how to write a check in elementary school. But they never taught us about credit, managing money, or investing.
Never was taught any of that. Glad to have found Ramsey!
What is "HS"?
@@sl523 High School
Thank you!!! No one has ever explained it to me this simple.
Personal finance and how the monetary system works should be mandatory in high school. Schools are very negligent preparing young people for the real world.
even if you learn about in high school though, if you're not buying your house till 30 that's a long time for that knowledge to decay. I'm pretty sure I did learn some of this in high school but it was so long ago it might as well have never happened. But that's what people like Dave Ramsey are good for, reminding us.
They are trying to indoctrinate not teach.
They are designed to keep sheeple subservient to the elites.
And parents are even more negligent. Stop depending on others to teach your kids about life.
yeah and they get to university and first booth they see is giving away a credit card to ruin their life after graduation
Excellent information. Thank you. Happy new year everyone.
Love Dave's philosophy. Being a mathematician, I'd like to point out one mistake. If you want to calculate the monthly interest from the annual interest p, you don't have to divide p by 12, but take the 12th root of p.
This is the best calculation breakdown i have ever seen. Thank you so much for making it so simple to understand.
Thank you for this explanation!!
By far one of the best most knowlege filled videos i've come across. It's amazing how many homes are owned yet very few of us actually know how this works. Thank you Dave!
I don't like the term " homeowner " when the bank owns the home unless it is payed off. I can't wait until I truly "own" my home. Should be called " home payer "
Meggan is more confused than ever now
Keorbats yes, she did not understand
Keorbats
Lol
It's a pretty simple concept
đ€Ł
Just look at your monthly statements. Even car loan interest are calculated the same. Shhheeesh.
Thanks for the clarification about the 'weekly' or 'daily' mortgage payments.
Dave thanks for the truth and explaining that so simply.
We have a Home Equity Mortgage (not a line of credit) through the same bank we have all our other liquid accounts, so it's nice to be able to see all of our accounts on one online screen, plus our Bill Pay tab. When I want to pay extra on the Home Equity, there is a box to check that's asking me if I want it to be a "Principal Only" payment - absolutely! Yes, check that box. And it DOES knock it further down if you do want to make an extra bit of a payment, say, every week, or every two weeks. At least, that's how ours works. There is a significant dip in the interest charge the next month when I have been able to even put an extra $50 in a calendar month directly toward the principle. The object of the game is to knock the principle down quickly; it's a waste of money to not specify that you want it to go directly to the principle.
I recently have started paying on principle for the 2017 Silverado my husband thought he needed. I tried by paying an extra $50 in the regular online payment through our bank. The next invoice did not reflect that it all went to principle. I read ALL the fine print then and, still unsatisfied, I made a phone call to the creditor. Turns out, there is a completely different address to sent Principle Only Payments to - ha! So now I have a tighter grip on that bill because I decided to own it more.
I haven't worked in several months because I've been doing cancer, but I hope to get back out there in the next few weeks. Now that the chemotherapy fog is lifting I'm able to see that our finances got really messed up this year, and it hasn't helped that I was let go from a long-time job a little over two years ago. I am so grateful that I found D.R. and am learning to turn it all around - still on the first baby step! My husband looks at me sideways when I ask him how much his bottle of Pepsi cost, but he's slowly understanding that we need to account for EVERY dollar while we get back up on our feet.
I hope the last two years have been awesome for you and your husband, Meggan! :)
it depressing how on a 30 year note the first 10-15 years is mostly interest...you dont start really hitting the principal towards the end.
working shlub, Thanks for commenting and watching this video! Don't forget to subscribe! czcams.com/users/DaveRamseyShow
The reason for this is due to how amortization works. If you amortize a loan to make the same payment throughout the life of the loan, than yes, the amount applied towards interest has to be more early on. You could instead amortize to make the same principal payment each month, but it would mean your payments are higher early on and lower later on. This is the opposite of what most people want, as we tend to earn more money as time goes on.
Yeah, good point. And the sad part is most people move or Refi by then anyway, so they start the whole dreadful process all over again!!!
What is worse is how much you have paid for the house after 30 years. Itâs way more than the principal plus interest rate. This is why renting in many ways is better.
Arvind Talukdar - renting is never a gd option, since youâre paying on someoneâs mortgage ( a home or apt complex)
This was super helpful! I'm slowly starting to put larger payment down on principal and am starting to see more of my payments actually impacting my total amount owed. By my calculations I could pay off my 20 year mortgage in 10 years! Cant wait lol
The simplest way to calculate how to pay off the mortgage in specific timeframe is to use a financial calculator.
I recommend the Hewlett Packard HP 10bII; costs about $35 and has a very nice informative instruction booklet.
Set the current Unpaid Principal Balance (UPB), also called the Present Value (PV), of the mortgage loan amount.
Set the interest rate, usually the annual interest rate and the calculator will adjust for monthly interest.
Set the Future Value (FV) to zero for fully amortizing (i.e., fully paid off).
Set the number of payments (N) to when you want the loan completely paid off.
Then calculate the monthly payment (PMT).
Make that monthly payment (PMT) every month for N months, and the loan is paid down to FV (zero in this example).
Dave! Thank you!
It's crazy what we don't know when we don't ask.
This was a really great explanation of it!
Freckle Finance . Are you serious....that was the most confusing explanation I've EVER HEARD.....and it's obvious the girl had NO clue what he was saying...
@@neale.kaufman5168 You are right, Neal.
This makes it so much clearer! Very helpful.
Very clear and to the point. Thank you!
Very Helpful!
The "Full Report" section of Zillow's House Affordability Calculator has a great chart (with table) which shows, and essentially explains, the concept of proportionality between principal and interest, that Dave was trying to explain.
Thank you this finally makes sense!
This is super helpful! Thank you!
This is the most informing video Iâve found from Dave... thanks for everything you do Dave! I owe 118k on my home and Iâve been wondering if I should put my tax return on my mortgage and now I definitely know I will.
68k for us left on our home, we will pay this off this year although we have 5 years left. We had a 15 year 237k mortgage
Good info. Thanks.
Thank you!
This is a good one and something everyone should hear.
Even making one extra payment a year, really affects the amortization table.
Thanks so much for breaking that down Dave! You bless you so much đđ
Loved it. Good stuff!
This makes a lot of sense and Iâm so glad to know this now since before I had no clue
If u calculate your mortgage after 30 years u pay double or triple the price of the house
Alumnikiid and your point? Would you rather rent and save money for 40 years before actually buying a house?
Thatâs so true. Itâs unbelievable.
Empire Textbooks His point is to manage the interest as much as possible because WITH INTEREST you pay 2.5X than you actually signed up for.
Angel Eyes33 but you didnt consider how much youâd be paying in rent before you actually could save up enough money to buy a house. Sure you would be paying a lot in interest but if you compare it to the amount of money that you would be spending on rent while you save up for the house itâs nothing near what you would be paying in interest.
That does not have to be true if your interest rate is low and you have put at least a 20% down. also, down the road when your income is higher then you can quickly pay off the principal.
Thanks, Dave!!! Your advice is always the best!!!
I had this question too thanks Dave!
Excellent information đđ
Hi Dave and team Ramsey, It would be useful to have a tool online on your every dollar app for people to compare 15 year and 30 year mortgage. Thanks for all you do!
Glad I was required to take a Corporate Finance class in college. I learned about Amortization schedule. I'm planning to make extra payments when I buy a house!
thanks for this explanation
thanks Dave!
I agree that what is taught in school is not what is used in real life situations. I think basic math , grammar and reading should be emphasized then money management and health and nutrition and maybe some more advanced courses to prepare those going to college.
This explains the beauty of paying off your house early!! Everyone please follow this advice like gospel. No matter what, make curtailment payments every month!!
Thanks Dave for greatly explaining this. New knowledge is amazing
Good Job in the explanation.
This was really helpful! I bought my first house last summer and didn't quite feel quite enough job security to commit to the large monthly payment of the 15 year mortgage. But at the same time, the idea of 30 years of debt chafes on me. So starting very soon now that I've dealt with all the expenses of furnishing my first home, I hope to start applying extra cash flow to the principal like Meggan.
While a 15 year mortgage does require higher monthly payments, you also save yourself so much more money off of interest in the long term, especially since you'll get a lower interest rate with that plan. So if you can afford to put aside more money into your home per month, then you should do it.
Every time u make extra payments make sure u tell the bank that the extra payment is going to your principal otherwise the bank is just gonna push your payment to the next month
What a great and clear explanation! Excellent video!
This is the clearest/best explanation I have ever heard!
7:49 I think with my bank, I have to pay the normal payment and then after that goes through I can pay a Principal Only payment. If I sent the extra amount on one payment, it takes interest out of the extra payment as well. That's what I was taught, but I'm probably wrong.
Jared S that is exactly the way chase does it with our mortgage. We have to send an additional check for principal only.
Jared S interest is calculated on the balance owed, not the payment you make. Now the interest is âsubtractedâ from the payment you make but itâs not calculated on that payment. So they donât take more interest if you make a bigger payment. Hereâs the formula for interest calculation: mortgage balance x (interest rate/12) = the interest they take from your payment. So $100,000 loan, 3% int = $250 interest subtracted from your payment no matter how much you pay for the particular month. So $1,000 payment - $250 interest = $750 to principal (Iâm leaving our insurance & taxes). Now if you make a $2,000 payment itâs still just $250 interest taken...again because interest is calculated on the mortgage balance.
Jared S the reason itâs best to make the regular payment & then send in the extra principal payment is so the finance company applies it as a principal only payment & not a prepayment of next months mortgage. You of course have to mark it âprinciple onlyâ & they still may Jack it up.
You do it that way because if you donât, they will consider the extra amount as a prepayment of next months mortgage payment so theyâll take interest from that portion of the payment too.
Dave is NOT correct! Simple interest is not the same as amortization. An amortized loan is front loaded interest. A rule of thumb is half way through the payment schedule the interest is paid and only principal remains. So on a 30 year MTG the first 15 years are primarily interest, the final 15 years of payments are primarily principal. You can pay additional moneys to principle but you need to specify that with your payment. This same schedule applies to vehicles as well.
You pay interest the entire 30 yrs except at the beginning the balance is big example 100,000 x 4% = 4000per yr interest divided by 12 months = 333.33 per month interest then when you principle balance is 10,000 x 4% = 400 interest divide by 12 = $ 33.33 per month
Thanks Dave
I learned so much from this video thank you â€ïž
LOL @ "Let's say I was gifted $1000...for I don't know...just being amazing"!
I thought she said âletâs say I was gifted $1000....or just doing amazingâ
1k for doing amazing things to amazing pplđ€đ€đ
Any extra dollar you send to your mortgage, is a dollar that wonât be charged interest
Right! $1 count too. Start somewhere.
Very good explanation Dave. Thanks
This was incredibly helpful.
Lightbulb!!! This video was fantastic! It helped me and my wife figure out that refinancing would be a mistake, and we pay can off our house, save up for the next car and downpayment on the next house all within the next 4 years, maybe sooner, and then turn this current house into a rental with way more cashflow!
I got taught this in high school. But it meant very little to me until I went to university and majored in finance. So yeah... very little kids find this relevant. What you found was relevant was if you hear your parents speak of this and discuss these issues. Iâll be sure to teach my kids all these things.
Mia exactly! Unfortunately, Iâm the one who is teaching my family members because no one knew this but me. Iâm currently teaching my cousin how to pay her house off. She is extremely thankful.
This makes so much more sense now. Thanks uncle Dave!
That was a brilliant explanation!
Folks, it's like 'chopping off' months at the end--bringing your end date closer. If it was originally due in 2033... you can finish EARLY. That's the point!
And as the principal goes down the length of the loan gets shorter! Dave failed to mention this key piece of information which is why you pay more against the principal.
very helpful.
This advice is gold đ
I've had my house for 3 years and I put an extra $100 a month. I also put my 3 income taxes to the principal which I've paid an addition $17,000 to my principal in 3 years
WOW, paradigm shift in mortgage knowledge!
Paradigm shift? no just high school basics, or something any teenager can see using a home loan calculator online.
Very Good explanation!! Thank you Dave.. Man i have so many questions i wish i could ask you
I often wondered if we should send in small payments during the month but this definitely answered for us. Thanks.
I love the disclaimer about her personality. I wish more people did this so I'd know to just walk away from the conversation.
Mr. Dave. Could you please make a summer school online learning Financial class for high schoolers. If itâs out there please send me the link.
thanks Dave
I had algebra,trig,geometry,advanced math,statistics,and calculus in school, but I think we spent one hour on principle and interest in the 9th or 10th grade. I don't think I fully understood amortization until I partially owner financed the sale of my first house. I am glad an effort is being made to offer financial advice to youth now. A little knowledge would have gone a long way when I started out.
In Australia, the interest is calculated on the daily balance like: (APR/12/days in that month)*balance, but only charged to the account at then end/beginning of the billing cycle. So in countries/banks where this is the case, paying more frequently than once per month does have an impact.
Sam McInturff I live in Malaysia. Here its the same thing, its what the banks here call 'daily rest'. Even if i put extra money on my mortgage account the bank will not deduct that extra amount that i put in. If I were to do this every month my mortgage account will become somewhat of a savings account with accumulated funds idling. It will not knock down the principal. I'm stuck with a 30 years mortgage it seems.
+Mohd Kamil đČ
Sam McInturff the same process stands. Just in your case you want to pay as much as possible as soon as possible. $1000 at the beginning instead of two $500 or four $250 payments throughout the month would save you interest.
âGifted $1,000 for being amazing.â
How sweet. Can I get that every month? I mean, I think Iâm pretty amazing myself. đ
Thanks Dave, I just learned an important lesson here.
In the mid '80s I bought my first house. The payment was in the $500 range on something in the 9% range. With the loan we got an amortization schedule. I noticed that the principle payment was like $16 and increased as the loan was paid off. I figured out that if I added an extra $16 or what that amount for the next payment was, I essentially made a $500 payment for $16 dollars. That is for $16 I reduced the number of payments by one payment. Of course the next month, that $16 would go up a dollar or so. But you could quickly knock off 5 Years of the loan. Each principle payment you make, you are essentially making the loan interest rate on that money for the remaining term of the loan.