The Mortgage payment schedule
Your mortgage payments are set up for you to pay the same each month, but there is a difference in the relationship between the principal and interest. This relationship changes every month. First, you pay the interest calculated from your previous balance. After that, your reminder goes to the principal. Then the following month the interest is then calculated from the reduced principal. This cycle is repeated until your mortgage is paid off.
Most mortgages give you the option to set up payments for the 1st of each month, lenders give you a 15 day grace period. You have 15 days to pay your mortgage and the 15th day is as good as the first if you decide to wait till the 15th day grace period.
A new tax law passed last year, there is a new $10,000 limit on deducting state and local taxes and they expanded the standard 2018 deduction. It makes sense to switch to the standard deduction since there is a limit on the new tax law.
What does all this mean?
So make extra payments to apply to the principal. The sooner you make the extra payment the sooner the reduced principal is lowered in the following months.
How about paying multiple times in the current month?
If you have the extra money to do this make your initial payment at the beginning of the month, then as the month approaches make your second payment towards the end of the month, but make sure your second payment makes the current month and not passed the end. One reason waiting to make your second extra payment allows your money in the bank to earn some extra interest. The second reason is that you will end up paying less interest than the difference of a few days.
It's better to wait until the end of the month to make your second payment!
This only works for mortgages do not try this on auto loans or student loans. These other loans work differently.
Find a reputable financial advisor to help with accelerating your obligations, If you find an advisor who is charging you a percentage of your assets, you will find your self-paying about 5-10 times too much.
Rene Gonzales
Financial Advsior
c. 512-568-7203
e. Rene.Gonzales@primerica.com
www.primerica.com/ReneGonzales
License #: 2265292
