Is It Smart To Double Your First Mortgage Payment?
Today's question comes from Jose, who asks if it's a good idea to double the first monthly payment on a 30-year mortgage. He also asks if that strategy is supposed to knock two years off the mortgage.
The simple answer is no. Making that single additional payment upfront will do very little; it might knock a month off. On the other hand, making one extra payment a year (or making bi-weekly payments) every year will take about four years off your mortgage.
Let's say you had a $500,000 mortgage with a 4% rate. That first payment is mostly interest. Only $700 or $800 at the most goes to the principal. Doubling that first payment would be like getting a slightly smaller loan, so it doesn’t make too much of a difference.
If you have any questions about this or real estate in general, feel free to call or email me. I'd love to help you.