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Yes, you need to specify that it goes toward the principal amount. With Wells Fargo if you pay online, this is super easy. Its been a while, but I think I set it up as an automatic transfer from checking to mortgage, and it asked me if that was an escrow payment or principal payment. It can be on the same day or a different day than your normal mortgage payment. Other banks may have different procedures.
Why would you max out your retirement before paying all debt minus the mortgage? That's bad advice.
401k Match of 50%-100% of money invested is better than paying off a 10-15% credit card technically. You could actually payoff your debts faster by maxing out your 401k contribution (up to the match only) and then taking a loan out from it to pay off all debts. The risk would be if the market tanks (which we've all seen happen) and/or if your job is lost, your monthly payments will still be high and a lot of your money is tied up in 401k (can only borrow a certain % from it).
That's why, now not everyone from a risk standpoint would want to do that, but the math with positive returns would be in your favor.
The first few years of your loan are the prime time to pay extra because a horrendous percentage of your payment is going to interest, and very little is going to principal. Somewhere in your closing papers you should have an amortization schedule that will break it down month by month through the life of your loan. Look at it...closely, and learn what a little sacrifice today will do for you tomorrow.
If you have a typical loan, you'll probably only be paying $150/month towards principal the first few years, so that extra $150 today will save you an entire mortgage payment at the end of your loan. An extra $150/month toward the end of your loan is still good, but by then it may only be worth a quarter of a payment.
Dropping an $1800 bonus or tax return towards your principle at the start of a loan will save you an entire year of mortgage payments. At the end of your mortgage, it will only save you 2 months.
Why pay off your mortgage before student loans? If you pay off your mortgage and come into hard times, they will come after you for student loans but can't take your house. If you pay off student loans and come into hard times, they can take your house. Secure your lifestyle by paying off the house.
^^^This calculator is absolutely the best I've found online. Pretty much any scenario you want to input is there. It tells you the date your loan would be paid off if you pay xx amount every month or once a year or one time payment starting now, next month, next year etc... Excellent. I keep going back to it for my needs. I would say this calculator has actually prompted me to pay more into my mortgage after seeing real dates of completion. It's like a new toy! lol Try it.
Thanks "Karl"!
I actually took a 30 year loan and am paying it off as if I had a 15 year loan. So far it;s working out and I have the option to stop if I have to for whatever reason. So far we've not had to stop in 7 years or so. should be 7 or so years left, but we're accelerating more, so we will have it paid off in 5 years or so.
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