Mortgage Paydown Programs

I had a reader write in asking about a Mortgage Paydown Program that would help her pay off her mortgage of $275,000 in 10 years. The program also told her that her payment of $1423 / month wouldn’t change.

I just wanted to write a little about this since I keep hearing of people wondering if these are actually legit. Well before you go any further, do the math. Say for example her lender was really nice and stopped charging her interest. If she wanted to pay down the loan in 10 years, her monthly payment would be $2291.67. So how exactly is this Mortgage Paydown Program going to allow you to pay a $275,0000 loan that is accruing interest and keep the payment at $1423? Smells like a scam to me.

If you are really serious about paying your mortgage down earlier, just make a few extra payments a month up to what you can afford. I make 2 extra payments a year. What I do is take my mortgage payment of $1334 and multiply it by 2 to see the total amount of the extra payments. I then divide that ($2668) by 12 so that I can distribute it evenly over 12 months. So I just add an additional $222 to my mortgage payment each month. At the end of the year I would have made 2 extra payments which in turn lowers my interest and lessens the amount of time that I will need to pay my mortgage.

I would also reccomend doing something like this rather than refinancing to a 15 year. Sure the interest rate would be a little lower, but you are then on the hook for a larger payment every month. With what I am doing, I can make the extra payments if I have the money, but if I don’t I can still just pay the minimum payment. So it is more of a security blanket than anything. With the way the economy and gas prices are who knows what my financial situation will look like in a few months.

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