Author Topic: Another pre-pay mortgage question  (Read 270 times)

EvenSteven

  • 5 O'Clock Shadow
  • *
  • Posts: 66
  • Location: St. Louis
Another pre-pay mortgage question
« on: February 20, 2019, 03:03:13 PM »
Amortization schedules can jumble me sometimes.

I am about 6 years into a 30 year mortgage, and am planing to do a contingent sale and use the proceeds as a down payment on a new home in the next one to three years. It seems like pre-paying principle would be making more than the mortgage interest rate (3.5%) in this situation because of where I am on the amortization schedule. Is this wrong?

(meant to post in investor alley, little help mods)

MDM

  • Walrus Stache
  • *******
  • Posts: 8978
Re: Another pre-pay mortgage question
« Reply #1 on: February 20, 2019, 03:06:59 PM »
Is this wrong?
Yes, it's wrong.

You are always paying the mortgage interest rate on the unpaid balance.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 2125
Re: Another pre-pay mortgage question
« Reply #2 on: February 21, 2019, 07:38:35 AM »
Where you are on the mortgage schedule affects how much TIME you gain by prepaying, but the rate of return remains the same.

Dicey

  • Walrus Stache
  • *******
  • Posts: 9231
  • Age: 60
  • Location: NorCal
Re: Another pre-pay mortgage question
« Reply #3 on: February 22, 2019, 07:17:44 AM »
You might also try asking this question over here:

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

Lotta smart people over there who will happily explain it in easy to wrap your head around ways. Once you know, you'll still be free to do whatever you want, as always.

EvenSteven

  • 5 O'Clock Shadow
  • *
  • Posts: 66
  • Location: St. Louis
Re: Another pre-pay mortgage question
« Reply #4 on: February 22, 2019, 10:00:27 AM »
You might also try asking this question over here:

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

Lotta smart people over there who will happily explain it in easy to wrap your head around ways. Once you know, you'll still be free to do whatever you want, as always.

Thanks, this bit was enough "You are always paying the mortgage interest rate on the unpaid balance."

It was really more of a "where to save a down payment" than a "should I pay down the mortgage early" question.