Basic Mortgage question

[J_V]

I bought a condo about a year ago. I am paying about 6%. It is a principal and interest loan. The way I understand my pay schedule is that I pay mostly interest in the beginning years (w/ a little principal) and mostly principal in the last years of my mortgage.

If I payed off 150k worth of my mortgage next month, would my next payments pay off a higher % of principle or would I just have 50k deducted off my lumps sum and stay on the same (%interest/principle ratio). I hope that was clear enough.

Essentially I want to expedite the process of getting into a situation where most of my 2300 is going toward principal and not interest. Is this possible?

[Ed Miller]

Yes, if you pay a big lump sum, a higher percentage of your future payments will be to principle. You can think of it this way:

At 6%, you are paying roughly 0.5% per month. So if you have $200,000 in principle, you owe $1,000 a month in interest. If your payments are $1,500, then you pay $1,000 in interest and $500 in principle each month.

If you whack that principle down to $50,000, then you owe only $250 a month in interest, so your $1,500 payments split $250 to interest and $1,250 to principle.

Make sure the bank applies your entire $150k to principle, though.. you may want to specify on your check "For principle only" or something like that. If there is a prepayment penalty or other such nonsense, they may try to snatch some of that money for no good reason. You shouldn't have a problem, but it always pays to make sure both sides are 100% clear whenever that kind of money is involved.

[Glenn]

You probably don't want to do this.

[J_V]

Thanks Ed and Glenn. Congratulations on tying the knot too Ed.