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Author:

Jessica Bennet

Community Mentor

Ask Jessica

Principal curtailment: Pay extra to get out of mortgage fast

Principal curtailment refers to making extra payments towards a mortgage debt to pay it off faster. The additional payments are applied towards the principal balance on the loan. The more extra payments you make, the faster the principal balance on the mortgage reduces. This helps you save a lot of money in interest payments over the entire life of the loan.

Principal curtailment - An example

Let's say,

The principal balance on the mortgage = $100,000
The term of the loan = 30 years
Interest rate = 5%
The monthly payments on the loan = $536.82 or $537 (approx.)[Using the FRM Calculator].
The number of payments it takes to pay off the entire loan = 12 x 30 = 360

Now, let's assume;
The extra payments towards principal = $100 per month.
The total money saved in interest over the life of the loan = $30,531.66. [Using the Mortgage Payoff Calculator]
The number of payments it will take to repay the loan = 256.

So, with an extra payment of $100 per month, the entire mortgage will be paid off in (256/12) or 21 years 4 months. This means it will take you almost 8 years and 8 months less than the scheduled time (30 years) to get rid of the mortgage liability.

Does principal curtailment reduce monthly payments?

Principal curtailment reduces the principal balance on the loan. It does not lower the monthly payments. But when you make extra payments, the principal balance gets reduced quickly, meaning an early payoff and savings in total amount of interest over the life of the loan.

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christinakellerhals

Joined: 11 Jul 2009
Posts: 1

1.76 Dollars($)

Post subject: Principal curtailment – Save money by making extra payment

My friend's mortgage statement had a line item for principal curtailment - we're not sure what it is.

annyb27

Joined: 07 Jul 2009
Posts: 144

-1.08 Dollars($)

Post subject: what is principal curtailment?

Mortgage Principal Curtailment – Borrowers can send extra payments to reduce their principal balance. Curtailments are not a significant contributor to prepayments (typically less than .25 CPR).

annyb27

Joined: 07 Jul 2009
Posts: 144

-1.08 Dollars($)

Post subject:

Principal curtailment is an additional payment paid directly against your mortgage loan's principal balance.

Guest

Post subject: Thanks!

We had never seen it listed as such on a statement - I'd always seen "additional payment on principal" on my online statements. He had stopped in at the institution because their website was having trouble, and paid in person - his next statement listed it as mortgage principal curtailment. Again, thanks - we thought that was what it was, but the difference from the normal turns scared us a little! _________________ Need help choosing the right loan? Get free consultation from community lenders/consultant

Niicss

Niicss

Joined: 03 Oct 2005
Posts: 4832
Location: New Jersey
508.56 Dollars($)

Post subject:

Fannie Mae has come up with certain instructions regarding mortgage principal curtailment. According to the new instructions, the borrower may not be given any cash back at the time of closing. If you get any cash back at the time of closing, it should be applied as a principal curtailment to the new loan. Also, you should note that the maximum amount which may be paid to reduce the principal is $250. _________________ Good is the Enemy of Great.

waylee

Guest

Post subject: Explain meaning of charges from Litton Servicing

7-20-09 Fee Assement-41.87 7-20-09 fee waiver-----41.87 7-20-09 Reverse payment-985.48 7-20-09 Forbearance Supense--985.48 7-28-09 Reverse Suspense-----985.48 7-28-09 Forbearance Suspense--54.29 7-28-09 Suspense adjustment----54.29 7-28-09 Princial curtailment-----54.29 8-04-09 Forbearance------------54.29 8-04-09 Suspense adjustment- 54.29 8-04-09 Prinvial Curtailment--54.29 I cannot get Litton to return my calls to explain what they have done or explain anything to me.

jonunderwood007

Joined: 03 Sep 2009
Posts: 38

-0.40 Dollars($)

Post subject: what is curtailment

A borrower is required to pay the scheduled P&I amount each month. In addition, a borrower can pay an extra amount to be applied directly on the unpaid loan balance. This amount is called a curtailment. It shortens the life of the loan. A few extra dollars per month can save thousands of dollars in payment of interest. Extra principal payments do not relieve a borrower from making a scheduled payment each month

wade branch

Guest

Post subject:

why does nt this amount show at the end of the year

savior70

Joined: 25 Mar 2009
Posts: 1895
Location: Florida
261.84 Dollars($)

Post subject:

Hi, The extra payments you make on your mortgage are applied against the principal and helps pay off the loan faster. I think it should show at the end of the year. You can contact your lender and ask for a detailed explanation as to how the principal curtailment has been applied towards the mortgage.

joel10

Guest

Post subject: payments

is it better to pay $100 extra per month or $500 extra every five months?

gmakerley

Community Mentor

Joined: 09 Nov 2007
Posts: 12376
Location: bloomfield, ct
58.49 Dollars($)

Post subject:

joel, paying additional every month will pay down the balance faster than waiting to accummulate $500 in the fifth month. it's not substantial savings, but savings nonetheless. _________________ George M. Akerley Mortgage Underwriter/Consultant Word of Excellence- Writing/Editing/Proofreading 860-221-5044

Anne

Guest

Post subject: paying extra on principal

I am paying 500 per month mortgage payment. If I pay an extra $500 on the principal each month how fast am I paying off the principal? rate is 6% 30 years

smithsussane

smith.sussane

Joined: 18 Sep 2008
Posts: 10439
Location: Alaska
985.83 Dollars($)

Post subject:

Hi Anne! Welcome to forums! You can use the given calculator in order to find out how fast you can pay off your mortgage: http://www.mortgagefit.com/calculators/extra-payment.html Feel free to ask if you've further queries. Sussane

Guest

Post subject: Mortgage Curtailment

If you have the extra money to put towards it, are there any downsides to paying curtailments on your mortgage since it is applied directly to the principal?

gmakerley

Community Mentor

Joined: 09 Nov 2007
Posts: 12376
Location: bloomfield, ct
58.49 Dollars($)

Post subject:

if anyone says there is a downside, i will be among the first to argue the point. of course, if you're foregoing essentials (food, clothing, etc.) to do so, that might call the practice into question. _________________ George M. Akerley Mortgage Underwriter/Consultant Word of Excellence- Writing/Editing/Proofreading 860-221-5044