Early first payment?

Question

I "heard" that if you pay your first mortgage payment early (before interest capitalizes) you can knock down the amount of total interest paid (over the life of the loan) significantly.

Is this true?

Answer 1

Paying your first payment early will knock down the interest. Also, paying one extra payment a year will knock years off the loan. The extra payment can be divided up over the year, it doesn't have to be all at once.

Answer 2

Making an EXTRA payment early in the mortgage will knock down the total interest substantially, since there's that much principal you aren't paying interest on compounded for 30 years or so. Just making a payment early will probably not do that much, although it might do a little.

Answer 3

You have been given some bad advice. In 99.99 percent of mortgages, paying any payment early in the month it is due WILL NOT save you any money. In fact it will cost you money as you loose the interest that money would have earned for you. Mortgage interest is calculated per month NOT per day on most mortgages.

You can save A LOT OF MONEY by paying additional principal with each payment.

BOB F

Answer 4

Be careful of paying extra payments. You may end up with a pre-payment penalty.

Answer 5

yes (somewhat) figure your rate x principal amount paid over 30 years...throw in some trick TVM and compounding and at the end of the day it saves you a few grand 30 years from now.

Answer 6

early....as in a week? you save 7 days
double are better

Answer 7

yeap, here go play with this calculator

Biweekly mortgage calculator: http://mortgage-x.com/calculators/biweekly.htm

Best of luck