[quote author="lawyerliz" date=1216514339]But don't do it that way.
I had a client who tried that and the computer program of the
lender couldn't handle it, and they ended up in foreclosure, and
had to pay me a bunch of money to straighten it all up. Figure out what the
increased payment amount would be and add that to your regular
monthly payment.
Or, just add an extra 100 or 200 a month and watch your principal
sink like a stone. Also, it doesn't hurt to check the bank's math against
an amortization table to make sure they are getting it right. The degree
of incompetence involved in banking is staggering. Also, if you have
an adjustible mtg, this will not shorten the term of your mtg, but your
payment will go down from what it otherwise would have been (meaning it
might go up but will go up less than it would have without that monthly
payment.).
As a rule of thumb, you take 25 years to pay half of the principal, and the
last 5 years to pay the other half. So prepayments in the first 5-10 years
of a loan really shorten the term fast with a fixed rate loan. Higher rates take
more time, say 25 1/2 years to get to the half way mark. Really low rates
get you to the halfway mark faster, but not that much faster, say 24-24 1/2
years.</blockquote>
When we owned a house, our mortgage was sold so many times that I can't even
remember what banks we had. It felt like it was sold every other year or so.
Some banks let us pay 2x per month, while other banks said their software couldn't
handle the extra payment.
I agree with Liz - make the extra principal payment each month instead of the
extra mortgage per year. It will be easier to track for you and the bank.
.