I bought a rental house in September 2001, financed $22,855.00 for 20 years at $198.00 a month. As of September 2004, my balance is $21,698.00, three years later. My calculations tells me that I have only paid $1,157.00 on the principal in three years!!!!! $4,971.00 has gone toward interest. My question is: I have a "ammorization schedule" and was wondering how can I apply more $$$ toward the principal and less in interest? BTW, home mortgage is with First Union Mortgage. Hello everyone.
In the early years of a long term loan most of the payment is to interest, not principal. You are getting the appreciation and use of the property without fully paying for it outright. You could pay additional principal with your payments, paying off the loan in less than 20 years. What is your interest rate? Does your rental income cover all your expenses, plus an adequate return on your investment?
Based on your figures, it looks like it's an 8.5 % loan. Now if you, starting in December 2004, pay an additional $200 towards principal (check with the mortgage holder to see if you have to show it specifically as additional principal, or if they will automatically use extra money towards the principal) Also check to be sure there is no penalty for early payoff, or balloon payments or anything else like that. Now if you pay the additional $200 towards principal each month, you will have the loan paid off in July of 2010 (11 years early)
