So I just wrote the check for my first extra principal payment. We’re halfway through 2008 and my goal is to apply an additional principal payment with each of my remaining mortgage payments through the remainder of 2008. Ideally, I’d like to send in at least double the amount of principal that is being paid with my standard payment each month, but we’ll see what happens… that might become difficult around Christmas time.

My June mortgage payment had already been made, but I still wanted to get in an additional principal payment prior to my July payment being made, so I wrote a check for $2,500 and sent it in today. This payment will basically be applied as additional principal to my June payment (as long as the receive and process it prior to my July 1st payment), so let’s take a look at what this will do to my mortgage balance and next months principal and interest payments.

Now, with the obvios fact aside that I spent an extra $2,500 on my June mortgage payment, let’s look at the resulting July mortgage balance and the resulting principal and interest payments. I’m decreasing the amount I’ll have to pay to next months interest by $13.28 – Yes, this is very small when compared to the $2,500 I just forked out, but let’s consider it over the course of the next year.

Assume I don’t make another additional principal payment, then I’ll be paying $14,857.40 just to interest over the next year, whereas if I had not made the additional principal payment, I would have been paying an additional $15,021.52 to interest over the next year. A differenct of $164.12. I still have 28 years remaining on my loan, so considering just a year is a very insignificant amount, but if we compare it to what I’ll pay to interest for the remainder of the life of my loan, that’s where we’ll see bigger savings. With the additional $2,500 principal payment, I’ll be paying $262,553.97 toward interest over the remaining live of the loan, and without the additional principal payment, I’ll be paying $274,772.74 to interest over the life of the loan. This is a savings of $12,218.77 – just for making an additional $2,500 payment today. More importantly, I’m also shaving 9 payments off of my mortgage, having my final payment of $373.92 coming due on 12/1/2035 rather than 9/1/2036.