Back in mid-June, I sent in an additional principal payment in the amount of $2,500 to be applied to my mortgage. I figured that since the stock market has been so slow recently, I might as well put my money into something that may give me a solid return (by making that single payment, I’ll be saving over $10,000 in interest over the life of my loan).

This post is just meant to detail and give some insight on the effect of making the additional principal payment last month, and how it effects this payment and all future payments toward my mortgage. My July 1st payment of principal and interest was $1,509.77. Of this amount, $1,248.60 went toward interest, and $261.17 went toward principal. I still have about 28 years left on my loan, so my payments toward interest will be quite high for a while longer, but without the additional principal payment, my next regular monthly mortgage payment would have been less favorable (though it is hard to become less favorable than 80% going toward interest). Here’s what the breakdown of my regular payment if I had not sent in the additional principal payment: $1,261.89 toward interest and $247.88 toward principal leaving me with a balance of $237,284, rather than my current mortgage balance of $234,770.

As I noted in previous articles, the amount of savings in interest expense in the short term really isn’t that great – only about $14 after 1 month, but over the life of the loan, it will really add up, and if I continue to make additional principal payments, it will add up even faster.

Stay tuned for an update on my next additional principal payment – I’m hoping to put earnings from this blog directly toward all of my additional principal payments.