mortgage payoff

AAAAAteam · February 2016

We have about $55,000 left on our mortgage and would like to bump it up to pay it off quicker. Our interest rate is at 3.8%. If you pay more than your payment does the rest you pay that month go directly to the principal? Hoping to be completely debt free in 2016!

labro · February 2016

I think we have to indicate whether we want additional payments to go towards principal only but it's probably different depending on your lender. That is SO exciting you're so close!!

hoffse · February 2016

We have to indicate the extra payments too, but yes, it will depend on your lender.

3.8% is pretty low. Are you on track to have your retirement funded?

LillibetteV · February 2016

I've had to specify on both mortgages I've had (differently lenders) that I wanted the extra payment to be applied to principal, but it was super easy. My old lender I still had to mail in a slip and a check old-school style and there was a way to indicate where you wanted the excess to go on their slip. My new lender is all online payment (yay!) so when I set up my auto-payment I included the amount of excess I wanted paid every month and how I wanted it applied to the principal.

bmo88 · February 2016

As other PPs have stated, you generally have to indicate the extra funds are going toward the principal. You can either write it on the form, apply it in a field (online) or write it on the check as well.

As @hoffse asked, how are you doing for retirement? We have the same interest rate for our mortgage after refinancing to a 20 year mortgage. We owe about $229,000 and cut off 9 years from our original mortgage. We could pay it down faster and may apply extra down the road, but for the time being, we are focused on our retirement contributions because we have time on our side and want to build up as much as possible.

Remember, once debt is gone, it is awesome. However, if your income situation changes or you find yourself short on funds in retirement, you cannot magically make that money re-appear. Paying a little more in interest can help you build up a lot more in investments.

als1982 · February 2016

This is awesome! Congratulations!!

AAAAAteam · February 2016

Our retirement is on track, we are 36 years old. And this has not come easy, BTW, 10 years of sacrifice! A light at the end of the tunnel is near~

MommyLiberty5013 · February 2016

I cannot recall if you stated this before in another post. But, do you have any other debts besides the mortgage? If so, and they are higher rates, why not pay those of first?

I agree with PP who suggested the full vesting in retirement for the year. You could then put the remaining money toward the mortgage amount.

AAAAAteam · February 2016

No other debt.

Erikan73 · February 2016

I specify on my check that "extra to go to principle". They even have a spot on their payment coupons that if you have extra if you want it to go to principle or escrow.

brij2006 · February 2016

AAAAAteam said:

Our retirement is on track, we are 36 years old. And this has not come easy, BTW, 10 years of sacrifice! A light at the end of the tunnel is near~

You guys are doing awesome! There are a few others in here who are debt free including their home, and it is an amazing feeling.

100% debt free by the end of 2016. Has a good ring to it. ;-)

als1982 · February 2016

AAAAAteam said:

Our retirement is on track, we are 36 years old. And this has not come easy, BTW, 10 years of sacrifice! A light at the end of the tunnel is near~

I LOVE hearing this! Thank you for serving as a great example - 36/37 is our target timeframe for being completely debt free including the mortgage. What would you say has been your motivation or tips to staying the course?

AAAAAteam · February 2016

Our motivation has been the freedom we will have with being debt free! I am a SAHM so our budget has been tight but we will soon be debt free, have all 3 kids in school and I will go back to work, at which point we will have a double income for the 1st time in our marriage and no debt. I guess trying to see thru to that has kept us motivated. I have been very frugal and stuck to a cash budget all these years. Cheap trips, kids haven't been to Disney yet, etc. But I think it will be worth it. We make memories in other ways. If we can't afford it in cash we don't do it or get it also. It's just a daily lifestyle at this point.....which I think we will be able to continue even after we reach our goal this year.

AAAAAteam · February 2016

Thanks for the encouragement everyone! I sometimes feel like people look at us as the crazy ones by our choices.....but we try to look at the big picture.

bmo88 · February 2016

AAAAAteam: I definitely know the feeling of people thinking you are crazy. We have been focused on paying off all of our non-mortgage debt at the moment (student loans and a car loan) and we are increasing our retirement.

A friend asked what age we want to retire and I told her we are planning to retire around 55 or 56 years old. She laughed and said, :yeah, that's going to be really difficult." She also proceeded to say, "there is no way we will ever afford to retire." This same friend spends a ton of money on eating out, buying stuff she likes, but doesn't need, and won't put anything extra toward her student loans. So in some ways, she is right, with her current approach, she probably won't ever retire. Which is quite unfortunate.

All that to say, it's the little daily habits that add to a lifetime of success. So keep it up!

jtmh2012 · February 2016

We're making extra payments too and just refinanced to 3.5%.

brij2006 · February 2016

AAAAAteam said:

Our motivation has been the freedom we will have with being debt free! I am a SAHM so our budget has been tight but we will soon be debt free, have all 3 kids in school and I will go back to work, at which point we will have a double income for the 1st time in our marriage and no debt. I guess trying to see thru to that has kept us motivated. I have been very frugal and stuck to a cash budget all these years. Cheap trips, kids haven't been to Disney yet, etc. But I think it will be worth it. We make memories in other ways. If we can't afford it in cash we don't do it or get it also. It's just a daily lifestyle at this point.....which I think we will be able to continue even after we reach our goal this year.

This is very true. We're debt free, including our home, and we actually live just as frugal, if not more frugal than we did when paying off the non-mortgage debt. It's just that at this point we prioritize and know what's most important. However, now that extra money goes toward giving, putting extra into retirement, and travel. We still don't have cable, don't eat out much, haven't bought a pair of jeans more than $30, and tell people "no" because it isn't in our budget.

I will admit that the judgments from people, are insane. There are friends who have made comments, "well, you don't have any payments, so you can afford it." No, no sweetie, we want to continue to not have payments. So we prioritize saving up for vehicles, save to upgrade in house someday, have a sinking fund for Christmas and vacations, and put a ton of money into retirement each month. So if you look at our budget, it actually is very slim and we can't afford many frills if we want to remain debt free.

short+sassy · February 2016

Congratulations! That is an amazing goal to strive for.

I just wanted to caution you to do a double check every month that the extra money is indeed going toward principal. With my last car, I had worked it out to pay it off in four years by taking the amount of two extra payments per year...divide it by 12...and spread that extra amount out with each payment.

Every single time, I told them to put the extra to principal. But I never checked until I was about a year in. They hadn't done that at all! They just put whatever the extra was toward the next month's payment. I was able to get the bank to fix it for me, but it was extra time and an extra hassle.

mortgage payoff

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