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Author: gattiss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121338  
Subject: Re: Mortgage Interest and Deductions Date: 2/13/2001 8:40 AM
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srhydecats wrote:
Have a mortgage and make extra payments each month. I know the loan papers state "the dollar amount the credit will cost me (finance charge)", but thought my extra payments were being applied to the principal amount, which in turn, reduces the total finance charge over the life of the loan.

As far as I know, this is true. I pay an extra $250 per payment, which will shorten my mortgage from 30 years to 15 years. And, yes, it saves me tens of thousands in interest by doing so. I think the "the dollar amount the credit will cost me" line is if you make the plain monthly payment on time each month; pay nothing extra.

Can the mortgage company apply part of the extra payment to interest that has NOT yet accrued on the balance of principal owed??

I have a payment book for my mortgage. It states the payment due and the due date. Then it has lines for additional principal, additional interest, late charges, and maybe one or two other things. I am not sure what pre-paying interest (in terms of paying an additional amount with your mortgage payment and using it on future interest) would benefit. I do know what paying extra toward the principal will benefit.

Based on what I did (making 14 mortgage payments instead of 12 during the year), I would not consider this pre-paying interest. But I do believe I should be able to deduct all interest paid during 2000 on my mortgage. If I deceided to make a mortgage payment a week I should be able to deduct the interest. I should know the mortgage company's answer some time today.
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