Calculating Micro Prepayments on my Mortgage

by Evan

For the past few years, I have rounded up my mortgage payment to the nearest $100.  It isn’t a ton of money, and to be honest I don’t even give it much thought.  Normally I just throw away the statement without even opening it, and then last week for whatever reason I actually opened it.  I saw the remaining balance and I began to actually think about those few extra dollars.  Not because it is a lot, but rather, on a level of curiosity.  Am I really saving that much interest? Did it really change my amortization table?  Should I continue to do it even if it doesn’t make mathematical sense because the amount is so low? etc. etc.  As I write this introductory paragraph, I have no clue the difference what my mortgage amortization table is supposed to look like and what it actually looks like today.

My House Mortgage Information

A few years back I provided a pretty detailed account of my home buying experience.   It was an experience I didn’t much enjoy, however, I can look back today and say I really do like where The Wife and I ended up and the area we have now raising our children.  I wasn’t so confident when I bought our place in 2013.

How are 30 Year Fixed Mortgages Calculated?

I assume most people do not even think about it but a traditional 30 year year fixed mortgage provides an amortization schedule wherein a certain portion of your level payment goes to interest and a certain portion goes to principal.  The interest to principal ratio changes as you get deeper into the life of the loan. There are other ways a note could be calculated but those are usually of no concern for someone with a 30 year fixed note – they are/were of major concern for those who used or are still using 5, 7 or 10 year ARMs (adjustable rate mortgages).

On January 18, 2013 I bought my home ($485,000 price) with the following note:

  • 30 year fixed
  • $388,000 Borrowed
  • 3.375% Rate (I am pretty sure I got in at near the historical low)

This provides me with an amortization schedule of:

Year Total
Payments
Principal
Paid
Interest
Paid
Ending
Principal
Balance
$388,000.00
1 $20,583.96 $7,605.92 $12,978.04 $380,394.08
2 $20,583.96 $7,866.61 $12,717.35 $372,527.47
3 $20,583.96 $8,136.26 $12,447.70 $364,391.21
4 $20,583.96 $8,415.13 $12,168.83 $355,976.08
5 $20,583.96 $8,703.59 $11,880.37 $347,272.49
6 $20,583.96 $9,001.91 $11,582.05 $338,270.58
7 $20,583.96 $9,310.46 $11,273.50 $328,960.12
8 $20,583.96 $9,629.62 $10,954.34 $319,330.50
9 $20,583.96 $9,959.68 $10,624.28 $309,370.82
10 $20,583.96 $10,301.07 $10,282.89 $299,069.75
11 $20,583.96 $10,654.16 $9,929.80 $288,415.59
12 $20,583.96 $11,019.35 $9,564.61 $277,396.24
13 $20,583.96 $11,397.06 $9,186.90 $265,999.18
14 $20,583.96 $11,787.72 $8,796.24 $254,211.46
15 $20,583.96 $12,191.76 $8,392.20 $242,019.70
16 $20,583.96 $12,609.66 $7,974.30 $229,410.04
17 $20,583.96 $13,041.87 $7,542.09 $216,368.17
18 $20,583.96 $13,488.92 $7,095.04 $202,879.25
19 $20,583.96 $13,951.28 $6,632.68 $188,927.97
20 $20,583.96 $14,429.49 $6,154.47 $174,498.48
21 $20,583.96 $14,924.08 $5,659.88 $159,574.40
22 $20,583.96 $15,435.65 $5,148.31 $144,138.75
23 $20,583.96 $15,964.72 $4,619.24 $128,174.03
24 $20,583.96 $16,511.94 $4,072.02 $111,662.09
25 $20,583.96 $17,077.92 $3,506.04 $94,584.17
26 $20,583.96 $17,663.32 $2,920.64 $76,920.85
27 $20,583.96 $18,268.75 $2,315.21 $58,652.10
28 $20,583.96 $18,894.96 $1,689.00 $39,757.14
29 $20,583.96 $19,542.62 $1,041.34 $20,214.52
30 $20,586.01 $20,214.52 $371.49 $0.00

Annually doesn’t exactly provide me with the information I am looking for:

Current Monthly principal

So, my current balance should be $353,826.50 (month 51 of a mind blowing 360 month note).

Comparing my Original Calculated Mortgage and my Actual Mortgage Balance

Taking a look at my current outstanding balance we have:

My Original loan information

So we are at $352,925.08 rather than $353.826.50.  Honestly, before writing this post I thought that difference would be larger.  I am pretty sure I could use those micro payments in a better way, but there is no guarantee I actually do it.  So, despite taking 500 words to learn that I could probably do something better with these tiny add-on payments, I am going to continue doing what I have been doing.

 

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1 comment

Brian @ The Graying Saver January 18, 2018 - 7:11 pm

Evan – have you checked out this sort of extra payment calculator:

https://www.calcxml.com/calculators/extra-payment-calculator

This would tell you the impact on the term/interest savings of a specific additional payment amount each month. An extra $100/month on your mortgage should cut the term by more than 2 years and would save you about $16.5k in interest.

The idea of paying it off 2 years sooner seems like an, “ok, that’s nice” sort of thing, but the idea of saving $16.5k in interest would be highly appealing to me.

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