# Calculating Micro Prepayments on my Mortgage

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:

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:

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.

1 comment

#### 1 comment

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.