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Additional Principal Reductions - Why Its Worth It.

You heard the radio adds, the television commercials, and your neightbor talk about the mortgage rates being at an all time low. Then you called your local mortgage company only to find out the rate was not much better than your current rate. Now what? Don't worry, you still have options and it wont take a refinance to do it.

Did you know that most mortgage companies will allow you to make additional principal payments on your loan balance? Perhaps you receive a larger than expected tax return, an inheritance, a non-taxable cash gift, or that work bonus you were not expecting. You could apply this money toward your loan principal which result in a signicant savings and shorter loan life.

For this example, I am using a loan balance of $150,000, a rate of 5.0%, and a 30 year fixed rate mortgage. Please note that these examples are useful on Conventional, FHA, and VA loan programs. The only time this will not apply is if you currently have an Adjustable Rate Mortgage.

Based on the above numbers, your mortgage payment (principal and interest only) would be $805.23 per month. If you made each payment on time, with no additional principal, then at the end of 30 years, you will have paid $289,885.27 in payments ($139,882.27 in interest).

Does your budget allow for you to make one additional mortgage payment per year ($805.23 per year) which would be applied directly toward your principal? If so, you would pay off your mortgage in 305 payments (25 1/2 years). This is a savings of $$24,524.59 in interest. Think you can save $805.23 a year?  No? How about if you broke up the $805.23 in 12 easy installments?

Look over your budget and see if you could afford $67.11 per month to add to your mortgage payment. By making this additional principal payment each month, you have increased your overall savings to $25,453.13. Your mortgage would be paid off in as little as 303 payments (25 years, 3 months).

All of this without spending ONE DIME on refinance fees. If you already have a great rate, but would like to pay off your mortgage sooner, this is the best way without refinancing to a shorter term. For best results, apply principal reductions more often rather than making one time payments each year. If making a principal reduction once a year, or once every 5 years is your only options, still do it.  The reduction should still save you thousands of dollars in the long run.


If you live in the state of Texas and are looking for a reliable Mortgage Professional to assist you with the loan product that best fits your financial situation, give me a call. We do not charge upfront fees to run scenarios or charge unnecessary application fees.

Do you want to know all of your options? Call me today and let's discuss them further.

Always available for your Frisco Texas Mortgage needs!

John Cannata  Reliant Mortgage  p# 214.545.5604

Frisco Texas Mortgage Consultant



Are you looking to purchase a Texas home?  Perhaps you love your Texas home but would be interested in refinancing your Texas mortgage to a lower interest rate?  

I'll help you get pre-approved for your Texas home loan and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice.  If you are available to talk, I am available to listen.  Give me a call or visit my website for more details.

Do you want to know all of your mortgage options? Call me today and let's discuss them further.

Texas Home Loan Consultant

Always available for your Texas Mortgage and Home Loan needs!

John R Cannata    P#214.728.0449

NMLS # 322646

Texas Home Loan Expert

Frisco TX Mortgage



The views expressed on this site are mine alone and do not reflect the views of my employer.

Comment balloon 12 commentsJohn Cannata • September 14 2009 07:18PM


I love this topic. You know that. Here's how I got crazy. After the 15-year refinance, I'm looking at just my 3rd payment since the refinanced, I've also knocked out over $2500 in principle amount. All that was only over $150 extra additional principle reduction. Nothing beats the 15-year refinance. I'm glad I did it. (I know it's not the main topic here but I want to cheer about that today). May I?

Posted by Loreena and Michael Yeo, Real Estate Agents (3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co.) over 10 years ago

Its amazing how so little goes such a long way in interest savings.  Good post, thanks.

Posted by Jon Sutton (EXP Realty LLC) over 10 years ago

Loreena - You were able to lower your rate and shorten the term. On top of that you are making additional principal reductions. Your method is by far the best option, but no everyone is able to make that type of progress. I still applaud your drive though. That should be the ideal goal, right? Pay off the mortgage and other debt as well. "Act Your Wage" as Dave says.

Jon - It really is. Many people tell you how they make huge reductions. Something as little as $67 a month makes a large difference and doesnt have break the bank.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 10 years ago

John, That's great advice!!  We refinanced to a 15 year back in the fall of 2001 which is way cool as we only have 7 years to go.  I don't know that I would have made the extra payments if I had not forced myself to but it sure makes sense.

Posted by Marchel Peterson, Spring TX Real Estate E-Pro (Results Realty) over 10 years ago

Marchel - I think thats the motivator. I've heard that from many people I have refinanced that they just didnt think they would make the additional payments. The forced payment on a 15 year term will certainly keep you on target.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 10 years ago


I am a proponent of extras....however cash is tight right now for many.

Posted by Trey Thurmond, College Station , Texas Homes (BCR Realtors) over 10 years ago

Excellent, my friend. I not only liked this post, I reblogged it!

Posted by Shirley Parks, Broker, 210-414-0966, San Antonio TX Real Estate (Sands Realty 210-414-0966) over 10 years ago

Trey - I agree that money is tight for many, and perhaps this post wont be for them. Over time, it will be though and they can book mark it until that time :-)

Thank you Shirley. Im glad you found it good enough to reblog.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 10 years ago

John - With $67 /month, I could take my family to McDonalds about 5 times.  I'm not sure I'm ready to give this up to save a meager $25,000.  Isn't there a better way?

Posted by Erik Hitzelberger, Louisville - Middletown Real Estate (RE/MAX Alliance - Louisville REALTOR-Luxury Homes) over 10 years ago

Erik - I wish there were. Sometimes you have to be disciplined.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 10 years ago

Hi John, too many people don't realize they can make additional payments to reduce principal.  Sometimes a lender will also allow you to make payments every two weeks instead of monthly, even without an extra amount, this will help over time to shorten your repayment period and reduce the total interest paid.

Posted by Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES, Florida Waterfront and Country Club Living (Tropic Shores Realty - Ich spreche Deutsch!) over 10 years ago

Silvia - If you make a half payment every two weeks it is equal to making 13 payments a year (or the example above). I understand your point though. What you want to watch for is some lenders will accept your 1/2 payment, but not actually apply the full payment until the other half is received. In order to save, you need the lender to apply the payment right away or else the interest is not saved. You brought up a good point though. Thanks!

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 10 years ago