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adrianlee1971 · Joined: 13 Sep 2009 Posts: 53 -0.17 Dollars($)

What are the benefits of paying down my principal with a lump sum?

jveenstra · Posted: Wed Sep 23, 2009 9:04 am Post subject: Pay Down

If you have a fixed rate mortgage, paying down a lump sum will cause the mortgage to be paid off faster becasue your balance is now lower, but, your payment will remain the same.
If you have an adjustable rate mortgage, your payment will adjust when the interest rate adjusts and the new payment will be based on the lower loan amount.
Once you "pay down" the bank has your money, you no longer have it. You might consider keeping the money in an interest bearing account and pay off the mortgage when the balance is such that your savings cover the pay off.
If you refinance and pay down the mortgage, your payment might be lower than now based on the new mortgage amount and current interest rates.
Depends on your goal: Lower monthly payment or pay off mortgage early.

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