Quote:
Originally Posted by gerryann
Thanks for the info. I haden't done my homework, but understand now.
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Hi,
In essence, if your mortgage is scheduled for fixed monthly payments and they do not charge for prepayment, what happens is that you could send extra payments to apply towards the principal anytime and therefore reducing your balance overtime. So, if you keep on paying more towards the principal and assume you pay the equivalent of a 3 years, then in the end you paid it sooner and your savings is the amount of interest that would have been charged on the last 3 years. For an actual current savings, it will happen only if the bank re-finance the terms of your loan. In my case, I am paying a 15 year mortgage at 2.75%-- it only makes sense for me to pay more towards amortizing my loan incase I cannot get a savings that will give me more than teh 2.75% charged -- because I am saving against my mortgage. Hope this makes sense and good luck.