I Can’t Bring Myself to Pay Extra on the Mortgage

Posted by Mrs Money on January 6th, 2010

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One of the goals that we failed from 2009 was paying additional principal on our mortgage. We had set a goal to make one month’s mortgage payment as an extra payment straight towards principal. I think I have a valid reason- we were focused on paying off our student loan, as well as saving more money in our emergency fund and contributing to my 401k. While I think that excuses are like armpits (everyone has one and they all stink!), I’m sticking with mine.

But at the same point, I could have made an attempt to pay even a little bit extra on the mortgage and didn’t.  It’s just that I can’t bring myself to make extra principal payments on our mortgage.  Here’s why: when I make that extra principal payment, I don’t see a huge dent in the outstanding balance.  It’s almost like it makes no difference.  I also would rather take that money and put it into a savings account.  Even though we have a fully funded emergency fund (I think), I still would rather have that cash on hand in the event of a crisis than in the equity of my home.

Then I start to think about how I’d like to move eventually, so I don’t think we’ll be in this house for 30 years anyway and if I make those extra payments the money is kinda gone.

I don’t know if these thoughts are totally bass ackwards or not.  It’s what makes the most sense to me right now.  Save the money.  I can always put additional on the principal later.

Do you think I should suck it up and just make some extra principal payments on my mortgage?  Or are my thoughts valid?

This post was included in the Carnival of Personal Finance at Darwin’s Finance

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44 Responses to “I Can’t Bring Myself to Pay Extra on the Mortgage”


  1. 2 Cents says:

    I think your thoughts are valid, but I can also tell you that it’s a great feeling to pay down your mortgage. Maybe try lookng at how much interest you can save over time, especially when prepayments are made earlier in the life of your mortgage. When you actually look at the numbers, it can be pretty satisfying.

    Unless you’re earning more interest on your savings than you’re paying on your mortgage, paying it down is a great idea, especially since it sounds like you have no other debt and a good emergency fund. You’ll have that much more equity to put toward your new home purchase too. Good luck!

    [Reply]

    Mrs Money Reply:

    I am definitely not earning as much money in my savings account. I do have a car loan with a balance of around $5,000 so that’s another reason why I think it may be better to not focus on paying down that mortgage right now. I’d like to get that knocked out first. Thanks for the luck! :)

    [Reply]

    2 Cents Reply:

    You are right. The car loan goes first! I think you guys are still pretty young if I’m not mistaken, so you’re doing great. Most folks your age are busy adding debt, not trying to pay it off!

    [Reply]

    Mrs Money Reply:

    That’s great about having it taken out each week. I’ll have to see if ours can do that!

    We’re 26 and 32. I’m the baby. :) Hubby robbed the cradle! Thanks for the compliment!

  2. Becky R says:

    On a 30 year mortgage if you make just one extra payment a year you save like 4-7 years off loan. THAT IS INCENTIVE!

    Also if you are paid weekly or biweekly you have an extra check a few times a year so, start paying your mortgage biweekly. Pay half a payment every two weeks. By year’s end you will have made an extra payment.

    [Reply]

    2 Cents Reply:

    Increasing payment frequency is a great idea Becky. We actually pay our mortgage weekly!

    [Reply]

    Mrs Money Reply:

    So do you just send in the payment each week? How does that work?

    [Reply]

    2 Cents Reply:

    It is automatically withdrawn from our checking account. :)

    Mrs Money Reply:

    I’ll have to figure out a way to work it either paying every two weeks or just making that lump payment at the end of the year. I like the every two weeks idea!

    [Reply]

    Sandy H Reply:

    I liked paying the mortgage twice a month (when we had one!). I was paid every two weeks, so it was very easy to have the mortgage taken out when I got paid. The mortgage was basically what I was working for mostly. And we didn’t really notice the ‘extra’ payment every year.

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  3. I know how you feel, it does seem kind of gone. I used to send in extra principal about 5 years ago. Then I realized that living on Long Island, that even when the mortgage was paid off some day, we would still need 9000 a year for taxes and 1800 a year for homeowners insurance, so what would be the big deal anyway.

    So I used the money to save interest on credit cards instead.

    John DeFlumeri Jr

    [Reply]

    Mrs Money Reply:

    I do have a car loan with a balance of about $5,000 on it and I’d like to get that knocked out first. I think I’d be better off if I focused the money that I was going to put on the principal for the mortgage to the car. I’ll have that paid off sooner then. :)

    [Reply]

  4. Tiffany says:

    I say to focus on one debt at a time. If you really want to pay down the student loan, put the extra money on that principal. In the end, you wont feel like you “wasted” your money on your mortgage, but perhaps more encouraged on paying off the student loan faster. Once that’s paid off, then reevaluate the debt you have, and pay that one down.

    [Reply]

    Mrs Money Reply:

    We did pay that student loan off last year so that was a good success! All we have left on unsecured debt is a $5,000 car loan. I think I may just attack that first and then go from there. :) Thanks for your help!

    [Reply]

  5. Evan says:

    Mrs. Money,

    A Couple of notes:
    1) “While I think that excuses are like armpits (everyone has one and they all stink!), I’m sticking with mine.”
    - Never heard this saying as applied to armpits, but maybe you keep better company than I do

    2) “Then I start to think about how I’d like to move eventually, so I don’t think we’ll be in this house for 30 years anyway and if I make those extra payments the money is kinda gone.”
    - This is the exact opposite of the advice you gave me concerning my car…

    3) Start really small, and just round up your mortgage payment, even if its 50 or 100 bucks. Make it a whole number. Then after a few months ask for a new amortization table you’ll feel better. I know HSBC just gives me one online.

    [Reply]

    Mrs Money Reply:

    LOL I had to keep it PG for the blog. I didn’t want to say the real thing!

    Here’s the thing (and I should have clarified this in the post)- I have a car loan of $5,000 that needs to be paid off before I add additional principal payments on my mortgage. So I’m working hard to get that paid off first. I think it would be better to have the car paid off before I do more principal payments to the house. I should have clarified that. Sorry!

    I think I’m going to do just that. $50 isn’t going to break me each month, but it will make a difference. I’ll definitely have to do the amortization too. Thanks so much for your comment!

    [Reply]

  6. Mrs. Money, you like Excel right? Go to this site and download the spreadsheet. http://www.vertex42.com/ExcelTemplates/loan-amortization-schedule.html You will be MOTIVATED to make extra payments! Here’s an example: If your 30 year mortgage $100K started now, was 7% (monthly payments $665) and you paid an extra $50/month this year, and only this year, your mortgage would be paid off 6 months early. That’s $600 in payments in 2010 to cut off $3990! You can really experiment with this spreadsheet, I love it. Even if you won’t be staying in your home forever, you will sell your house and the less money you owe on the principal when you sell, the more money you’ll have left to apply to the new house. Right? I think Frugal Babe does (or was doing) a thing where she pays an extra $10 every month. You know, $10 this month, $20 extra next month, $30 next month, etc. Let us know if you work up your nerve to do it! :-)

    [Reply]

    Mrs Money Reply:

    The only thing holding me back is the balance of my car loan. I still owe $5,000 on that. I think I’m going to make extra principal payments while I work on paying off that car loan. Thanks for the info! :)

    [Reply]

  7. Why not just contribute less, in more frequent amounts? i.e $50 bucks to principal every time you visit the bank? That way, it doesn’t hurt, and you feel good about paying it down.

    [Reply]

    Mrs Money Reply:

    I think that’s a great idea. I do have a car loan with a balance of about $5,000 that I’d like to get paid off first. I definitely think I can swing an extra $50 a month to do the mortgage too though!

    [Reply]

  8. Mrs. Micah says:

    I get not paying it while focusing on the student loan debt. Now that you’re free, perhaps the 1 principal payment a year is a good approach

    Like you, I like having a solid emergency fund. But even if you don’t make paying it off a priority, taking little steps like a 13th payment can still make a difference.

    [Reply]

    Mrs Money Reply:

    I do have a car loan with a balance of $5,000 on it still. I should have clarified that. :) You still think I should work on the principal? I think I’ll try to do $50 a month extra. That will at least go somewhere, right? :)

    [Reply]

    Mrs. Micah Reply:

    Then I’d put the extra debt-repayment money towards the car and not the mortgage (or only a bit a month towards the mortgage, like $50). Much faster payoff and often a higher interest rate anyway. :)

    [Reply]

    Mrs Money Reply:

    I agree- sounds like a good plan! :)

  9. I do what one of the other posters said — round up the mortgage payment to an even number. I wanted to pay about $25 extra each month, but rounded up, it’s $27.15 — about $326 after a year. I found that even though it’s s small amount, it reduces the interest we’ll be paying over the life of the mortgage. Perhaps it’d be better for you to pay off your car loan first, since you’ll see that you’ve accomplished something.

    [Reply]

    Mrs Money Reply:

    I’ve been rounding up but it’s such a small amount, like $6 or so! ;) I will have to round up even more.

    I think I will focus on that car loan. It’s the last of the unsecured debt and it’s just bothering me!

    [Reply]

  10. I look at it from the perspective of what your money could be earning. If your mortgage is 5-6% and you can beat it with another investment earning say, 9-10%, I would chose the other investment. If you’re simply sticking it in savings then maybe the mortgage payment would be a better option, depends on if you need to add more to your emergency fund.

    Also, I like the saying bass ackwards, never heard that one before… maybe I need to get out more???

    [Reply]

    Mrs Money Reply:

    I think that if I look at it from the perspective that my money is “earning” my mortgage rate (around 5%) then that will help. :)

    I figured bass ackwards was a better thing to say than the real thing! ;)

    [Reply]

  11. Bucksome says:

    I would pay off all non-mortgage debt before paying extra towards the mortgage. Especially if you don’t plan on being there forever.

    If you have debt and a fully funded emergency fund, I don’t understand why you’d just sock it in the bank. It’s not doing you any good there as Ryan pointed out.

    (BTW Ryan, you do need to get out more:))

    [Reply]

    Mrs Money Reply:

    That’s what I think. I really want to knock out that car loan this year. And we’re kicking around the idea of moving pretty seriously now so I hate to tie up my money.

    I think one of the reasons that I sock it in the bank is because I am a little Type A. ;) My car loan is at 0% and I’m earning more than that on my savings account. On the flip side, I am SO TIRED of the stupid car payment that I just want to get rid of it. It will happen this year. :)

    [Reply]

  12. DJ says:

    I have to focus on one thing at a time or it all seems overwhelming. We paid off our auto loans first. Now, we are beefing up our emergency fund savings. Next, we will work on the mortgage. I love being debt free, and hope to be mortgage debt free in the next 4 years!

    [Reply]

    Mrs Money Reply:

    That’s what I think. It is overwhelming when I tried to do so many things with our money in 2009. I figured this year I would go easier on us and make our goals some that we can accomplish! I would love to be mortgage free in 4 years. I hope you can do it!

    [Reply]

  13. Frugal Babe says:

    Years ago (when we weren’t making much money at all) we decided to start paying extra towards the mortgage, but we didn’t have much extra to play with. We started with about $50/month, and then we increased it by $10 each month. We figured we wouldn’t miss an additional ten bucks each month, but we knew that over time it would add up. After a few years, we were paying a few hundred dollars extra each month. And when we sold our house last summer, we netted enough money to put a 20% down payment on our new house. We had only put 5% down on the first house when we bought it in 2003. Those extra payments over the years definitely added up. We were able to get a 4.625% interest rate on the new house, with a 15 year fixed loan (which we’re working to pay off early, of course!) We wouldn’t have been able to do that if we hadn’t had the down payment that came from all those extra payments on the first house.

    [Reply]

    Mrs Money Reply:

    That’s awesome! We’re kicking around the idea of moving so I’m stuck on the idea that I’d be tying up our money in the house. I think I should start with a small amount like you did. I do need to pay of that darn car loan first though I think. :)

    [Reply]

  14. I vote for never paying extra on your mortgage. I’m fairly new to this blog and I don’t really know you but you seem like a pretty responsible person. If you can be responsible enough to save money on the side outside of your mortgage then you will be far better off. It depends on what you consider debt free. Does that mean you have no debt or that you have enough money in a side account to pay off the debt whenever you choose so your balance sheet is positive?

    Also remember, the return on home equity is always zero…http://evolutionofwealth.com/2009/11/return-on-equity-is-always-zero/

    [Reply]

    Mrs Money Reply:

    Evolution Of Wealth- Interesting. I just read what you wrote. I am not debt free yet but I guess I consider debt free to not include a mortgage. I am going to be happy to be debt free minus the mortgage when it happens!

    We have been saving any extra money in a savings account. :) Thanks for your comment and sharing that post with me!

    [Reply]

  15. When I started paying down the mortgage, I would add the nexy month’s principle. That’s a small amount. Then I would cross one month off the mortgage.

    At the moment, savings accts are paying almost nothing–a mortgage paydown is one of the absolutely safe things you can do with your money and get a decent guaranteed return.

    [Reply]

    Mrs Money Reply:

    frugalscholar- I’m going to start adding a little extra and then try to do more. Baby steps will be good for me!

    [Reply]

  16. We’ve always rounded up to the next dollar, which doesn’t make much of a difference at all, but is easy to keep track of since it’s a round number. At some point we’ll make additional payments that actually have an effect, but we’re not quite there yet.

    [Reply]

    Mrs Money Reply:

    How Green is My Valley- We round up and it’s an extra $6.81 a month. It’s not a lot, but it’s pretty cool to know it’s making a little big of an impact, right? :) I think every little bit helps!

    [Reply]


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