Question 1

What is an amortization schedule?

Accepted Answer

An amortization schedule is a table showing each loan payment broken down into principal and interest. Early in the loan, most of each payment goes to interest. Over time, more goes to principal. For a 30-year mortgage at 6.5%, about 54% of the first payment is interest, but by the final years, nearly 100% goes to principal.

Question 2

How much can extra payments save on a mortgage?

Accepted Answer

Extra payments can dramatically reduce total interest and loan term. For example, on a $300,000 mortgage at 6.5% for 30 years, adding just $200/month extra saves approximately $95,000 in interest and pays off the loan about 7 years early. Even one extra payment per year can save tens of thousands.

Question 3

Should I make extra payments on my mortgage?

Accepted Answer

It depends on your interest rate and alternative uses for the money. If your mortgage rate is high (6%+), extra payments provide a guaranteed 'return' equal to your rate. If your rate is low (3-4%), you might earn more by investing extra money in index funds. Always pay off higher-interest debt (credit cards, personal loans) before making extra mortgage payments.

Concept	Details
Front-loaded interest	Most interest is paid in early years
Extra payments go 100% to principal	Reduces balance and future interest
One extra payment per year	Saves 4-7 years on a 30-year mortgage
Biweekly payments (26 half-payments)	Equivalent to 13 monthly payments/year
Refinancing at lower rate	Restarts amortization but may save overall

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