Extra Payments toward principal vs saving and eventually paying off (payment schedule, financial)

[mortgage2020]

Which option is financially better for Mortgage Payoff:


1. Making extra payments toward principal on top of monthly required payments


or


2. Saving up all of the extra payments until enough is saved up to full pay off the mortgage balance which will be in a few years.




if 1st approach is followed, does it have any impact on the required monthly mortgage payment in terms of how much is applied toward principal and how much is applied toward interest?
If so, please advise if there is a tool where you can plug in numbers and see how much you'd save, etc...

[adjusterjack]

Option 1 is better, as long as you start early and make the additional payments regularly.


Option 2 is not a good idea because the longer you wait to start the more interest you have already spent because the interest portion of your payment is very large in the early years.

if 1st approach is followed, does it have any impact on the required monthly mortgage payment in terms of how much is applied toward principal and how much is applied toward interest?

Yes, it does, very much so.



Here's an amortization calculator you can use to run the numbers and generate a payment schedule showing how each month works.


Mortgage/Loan Calculator with Amortization Schedule


There are those who will tell you to invest your money instead of paying down the mortgage. Those people have been awfully quiet lately since the stock market crashed.


Investing is a crap shoot.


Paying off your house is a sure thing.