Paying off a mortgage

Hi there,

I have a mortgage (25 years) with a variable interest rate. I plan to pay off the principal in small amounts periodically. Is there a table that I can use which would let me know by how much my amortization period has reduced by paying off the additional principal amounts.

Thanks,
SJ

Without intending to, you've asked a trick question. If this were a fixed rate mortgage, then yes, additional principal payments would effectively shorten the life of the loan.

However, since this is an ARM, each time your payment resets, the required payment will be recalculated based upon the new current balance and the original loan maturity date. Your required payment will change (hopefully go down), but the life will remain the same.

That said, for any given month:

Calculate the new remaining term after your payment without a curtailment:

NPER(Rate/1200, Scheduled Payment, -(Current Balance * (1+ Rate/1200) - Scheduled Payment))

Calculate the new remaining term with a curtailment:

NPER(Rate/1200, Scheduled Payment, -(Current Balance * (1 + Rate/1200) - Scheduled Payment - Additional Payment Amt))

The difference between the two tells you how much you have shortened the life with an additional principal curtailment.

Hope this helps

SAE