Author Topic: lump sum vs extra monthly payment to mortgage?  (Read 12344 times)

megan1104

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lump sum vs extra monthly payment to mortgage?
« on: August 14, 2016, 03:07:17 PM »
Can someone point me to a calculator that shows the difference between making a lump sum payment to my mortgage principal vs making extra additional monthly payments? I assume there would be some benefit to putting down a chunk ASAP vs smaller payments every month stretched out over a period of time, but can't find a calculator to play with. (Or, if I'm totally wrong that this makes any difference, someone please feel to let me know.)

nereo

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #1 on: August 14, 2016, 03:46:23 PM »
This should allow you to do what you ask:
http://usmortgagecalculator.org/

Click the tab that says "extra payments" to add extra monthly or one-time payments.

Kroaler

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #2 on: August 15, 2016, 09:24:19 AM »
Im really partial to karls mortgage calculator!

https://www.drcalculator.com/mortgage/


Also with interest rates as low as they are, I think a few people on MMM are saying to invest the money.

frugalcoconut

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #3 on: August 15, 2016, 10:50:34 AM »
I think it also depends on whether you have the large chunk of money now or if you'll have to gradually save up for it instead.

In some ways I prefer to set aside (in a bank account) a chunk of money for a future lump sum payment ... just in case there ends up being a better use for it. Once you apply it to the mortgage, there's no refund option if you suddenly need/want it for something else. You never know where life takes you sometimes. ;)

Simpli-Fi

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #4 on: August 15, 2016, 11:16:03 AM »
I'm no expert but I did read some MMM forum last night.

I have always been a pre-pay guy, reason I have five figures left on a $150k high interest (6.5) 30 year mortgage after 10 years...no pre pay would have been $120k.

Had I put the extra payment in the market and just met the same interest return of the mortgage I would have been thousands ahead and with the crashes and 18500+ we see today, I'd probably be tens of thousands ahead.  Not pay off mode but greatly ahead.  All I seem to have done is lower my debt to income ratio which seems to only help to acquire more debt.

I've flipped sides especially now that you can get a 30 year fixed for <3% (looks like paying points)...but with the market at a record high, I'd probably lean to more bonds than stocks moving forward.


cchrissyy

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #5 on: August 15, 2016, 11:48:25 AM »
http://www.decisionaide.com/mpcalculators/extrapaymentscalculator/extrapayments1.asp

I like this one because it allows for monthly or lump sum prepayments and, unlike the others recommended so far,  you can make monthly payments just for a while then stop, or you can change the amount of the monthly payment at some point.
 
This matches my real world needs and I think your question. Too many calculators will answer the question "should I put in an extra $10k now, or should I send in $1k per month forever" when the real question you want the calculator to answer is "should I put in an extra $10k now or $1k per month for 10 months then stop doing that" ... and then what if in a few years I start doing the extra payments again... then in 5 years I want to do a lump sum... 
This link can do all that.

Dicey

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #6 on: August 15, 2016, 12:34:58 PM »
I'm no expert but I did read some MMM forum last night.

I have always been a pre-pay guy, reason I have five figures left on a $150k high interest (6.5) 30 year mortgage after 10 years...no pre pay would have been $120k.

Had I put the extra payment in the market and just met the same interest return of the mortgage I would have been thousands ahead and with the crashes and 18500+ we see today, I'd probably be tens of thousands ahead.  Not pay off mode but greatly ahead.  All I seem to have done is lower my debt to income ratio which seems to only help to acquire more debt.

I've flipped sides especially now that you can get a 30 year fixed for <3% (looks like paying points)...but with the market at a record high, I'd probably lean to more bonds than stocks moving forward.
Oil Patch, congratulations on seeing the light! So, are you going to re-fi that high interest mortgage?

Simpli-Fi

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #7 on: August 15, 2016, 02:26:31 PM »
I did... And acquired more debt. D'oh!!!  But right now, all my debt is aquiring income as rental properties.


Dicey

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #8 on: August 17, 2016, 09:35:20 AM »
I did... And acquired more debt. D'oh!!!  But right now, all my debt is aquiring income as rental properties.
Yay! (I think), but could you please clarify the bit bolded above? What is "acquiring income"?

Simpli-Fi

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #9 on: August 17, 2016, 11:15:21 AM »
ac·quire  (ə-kwīr′)
tr.v. ac·quired, ac·quir·ing, ac·quires
1. To gain possession of

in·come  (ĭn′kŭm′)
n.
1. The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.


I dunno maybe I worded it strangely???  All I meant was anything I owe a note for... is paying for itself and putting money in my account.

K-ice

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #10 on: August 17, 2016, 03:53:25 PM »
This is my favorite spread sheet. You can add extra monthly payments play around with different lump-sum payments in the yellow column.

http://www.vertex42.com/Calculators/home-mortgage-calculator.html


You can see how putting down $12000 today would save you more than $1000/month for the next year.


I also find it interesting how putting down x amount in year one saves you more than putting down the same amount in year 5.


Depending on the term and the interest it is almost a 1 to 1 payoff at the start, that decreases as time goes on.


NoNonsenseLandlord

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #11 on: August 26, 2016, 08:26:05 AM »
I threw some thoughts about my own mortgage down a while ago.  Until the mortgage is paid 100%, your cash flow does not improve, at all.  Your tax deductions become less, as you have less interest to pay (which is a good thing).

So, your financial situation is actually WORSE, until the mortgage is 100% paid off, if you make extra monthly principle only payments.

http://www.nononsenselandlord.com/2016/08/pay-off-rental-mortgage-debt/
« Last Edit: August 26, 2016, 08:49:32 AM by NoNonsenseLandlord »

Dicey

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Re: lump sum vs extra monthly payment to mortgage?
« Reply #12 on: August 27, 2016, 07:24:32 AM »
I did... And acquired more debt. D'oh!!!  But right now, all my debt is aquiring income as rental properties.
Yay! (I think), but could you please clarify the bit bolded above? What is "acquiring income"?
ac·quire  (ə-kwīr′)
tr.v. ac·quired, ac·quir·ing, ac·quires
1. To gain possession of

in·come  (ĭn′kŭm′)
n.
1. The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.

I dunno maybe I worded it strangely???  All I meant was anything I owe a note for... is paying for itself and putting money in my account.

Perhaps if you said earning income rather than acquiring income? Better still that your rentals have positive cash flow? Not going all Grammar Nazi on you. I just was trying too hard to understand what you meant, so I asked rather than guess.