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PLAN 2: EQUAL DOLLAR AMOUNT PREPAYMENT
Instead of adding an odd dollar amount each month, you may prefer to make what we call the Equal Dollar Amount Prepayment. This is a prepayment which will be the same amount each month. Why the same amount each month? Some people prefer to make a prepayment of the same amount each month because it’s easier to budget when you write that monthly check. Many of our readers have started prepaying this way after they have recently paid off a monthly credit card bill or after finish paying off a car loan. They then started to apply their former payments towards their mortgage. Next is and example of an Equal Dollar Amount Prepayment prepaying $100 a month starting at the beginning of the loan.
|
PAYMENT NUMBER |
Due Date |
Payment |
Interest |
Principal |
Balance |
|
|
|
|
|
|
|
|
1 |
6/2009 |
$1,598.88 |
$1,250.00 |
$348.88 |
$249,651.12 |
|
2 |
7/2009 |
$1,598.88 |
$1,248.26 |
$350.62 |
$249,300.50 |
|
3 |
8/2009 |
$1,598.88 |
$1,246.50 |
$352.38 |
$248,948.12 |
|
4 |
9/2009 |
$1,598.88 |
$1,244.74 |
$354.14 |
$248.593.98 |
|
5 |
10/2009 |
$1,598.88 |
$1,244.74 |
$355.91 |
$248,238.07 |
|
6 |
11/2009 |
$1,598.88 |
$1,241.19 |
$357.69 |
$247,880.38 |
|
|
|
|
|
|
|
Summary
Total interest if not prepaid $289,593.09
Total interest if prepaid $238,021.70
Total amount saved prepaying $ 51,571.39
Number of months saved prepaying 54
As you can see, you will save over $51,500 in interest and cut 4 years 6 months off the length of your mortgage.
Prepay the Same Amount Each Month