Extra payment trims years off mortgage

Don Taylorq_v2.gifDear Dr. Don,
I have asked several people this question, and I hope you can give me an answer. I owe $70,000 on my mortgage. The interest rate is 5.75 percent fixed and it has 11 years remaining. I want to shorten the time of the years left because of my planned retirement in nine years.

If I pay $700 a month on my payment, how much do I need to pay toward the principal, and how often, to shorten the years of my mortgage?
-- Diane Debt-Free

a_v2.gifDear Diane,
I think it's a good goal to try to have your mortgage paid off by the time you retire. It isn't always possible to do, but your plan of shortening the loan from 11 years to nine years should be fairly easy to accomplish.

My numbers won't match yours exactly, but a fixed-rate mortgage at 5.75 percent with 11 years remaining has a monthly payment of $716.80. Bankrate's "Mortgage payment calculator" allows you to input your precise mortgage balance and the number of remaining payments.

From there, you can use the calculator's amortization schedule and additional payment options to determine what it will take to have your loan paid off in nine years. I input different monthly numbers and then asked the calculator to recalculate the amortization schedule.

My estimate is that an additional $115 a month will shorten the loan term from 11 years to nine years. By doing this, you'll also save about $4,750 in interest expense.

A once-a-year additional principal payment of $1,400 will provide about the same results, so do the approach that works best for your budget.

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & investing" or "Money." Read more Dr. Don columns for additional personal finance advice.

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