Paying Off Faster

Expert, localized Los Angeles answers provided by Heather Roy

Paying Off Faster
	Ms. Lank: I am about to purchase a house and can't quite swing a 15-year so will have to go with a 30-year mortgage. Someone pointed out I could buy it down faster by making extra payments. But I was concerned that I was just paying off the total interest due faster, not the principal.

	At any given time, you are charged interest only on the exact amount you borrowed during the preceding month. After you make an extra payment (separate check, clearly marked "to be applied entirely to principal reduction") you are borrowing less than was scheduled, so you owe a bit less interest. With a fixed-rate mortgage, your monthly payment will remain the same, but a larger portion of it will be available to reduce the principal faster than originally planned.
	Edith Originally published on March 13, 2005

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