Move My Realty - Real Estate News

Prepay mortgage principal, not interest

Q: Dear Dr. Don,
I have a 15-year mortgage which I pay every two weeks. I want to make a lump-sum payment of $10,000 on my loan. Should I apply it to interest or principal?
-- Tyrone Treatment

A: Dear Tyrone,
Additional principal payments are the best way to pay down your mortgage faster. By reducing the loan balance, you reduce the interest expense on the loan, thereby shortening the loan term. However, you want to make sure the lump-sum payment doesn't trigger a prepayment penalty on the loan.

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Posted by Ronald Mastrodonato on July 17th, 2009 9:44 AMPost a Comment (0)

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