If I make a payment on my mortgage principal - will it affect the payments?

Question

I have friends that say two different things. How does it apply in Florida law - If I make a large payment towards the principal of my trailer, which was sold to me as a privately finaced deal from the seller, will it lower the monthly payment of the mortgage (since the principal is then lowered) , or will it just shorten the time to pay the loan of the remaining balance, reducing interest and not affecting the monthly payment amount ?

Answer 1

It will shorten the term without affecting the payment amounts. It will also reduce your total interest paid.

Answer 2

Pretty much every loan you will come across, mortgage car student etc, will be based on fixed payments. Unless you refinance your payments will not change.

Basically, the way these loans work is each month the intrest rate is multiplied by what you have in principle. That's your finance charge for that month. Say your payment is 1000 each month and the interest for this month is 750. That means that this month you are paying only 250 towards your mortgage. But what if instead of paying 1000 this month you pay 10,000, then this month instead of paying $250 towards principle you paid $9,250. So next month comes and the interest is being calculated on on 9,250 less than it was the previous month so theres a whole heap of interest that you don't have to pay anymore and your loan will end sooner

Answer 3

Usually the payment will stay the same, but it will change the amount of your payment that goes to interest since your principal will be lower, and it will significantly shorten the time to pay off your mortgage.

Answer 4

It probably doesn't matter what Florida law says on this. Most standard mortgages and notes contain a "prepayment clause" that addresses this situation. They usually read that a prepayment of principal, regardless of amount, does NOT entitle the borrower to a change in payments or due dates.

Look at your note carefully. Even if that isn't there, it almost certainly is very clear that you have to pay a specific amount each month. Paying early doesn't alter that.

Answer 5

The principal payments will reduce the amount you owe, and reduce the amount of interest you pay...but the monthly payments stay the same until its paid off.

Answer 6

Only way the payments will change is if you refinance. But, you are doing a very good thing by paying down the principal as much as possible. By doing so, you pay the loan off quicker and are saving so much money in the long-term.