Progress to Date

  • Original Loan Amount: $204,000.00
  • Balance at Beginning of 5-year Goal (1/1/08): $188,983.82 @ 6.00%
  • Balance at Refinance in February 2009: $148,000.00 @ 4.625%
  • Outstanding Balance: $0.00 (PAID IN FULL!!!)
  • Latest Payment Date: April 2011
  • Latest Additional Principal Amount: $17,623.22
  • Amount Ahead of Schedule (since refinance): $121,462
  • Time Ahead of Schedule (since refinance): 7 years 10 months
  • Interest Saved Last Month: $23,972.48
  • Total Interest Saved: $28,435.55 ($1,037.74 on original mortgage; $27,397.81 on current mortgage)
  • Months Remaining in 5-year Goal: 20
  • Average Monthly Principal Needed to Meet Goal: N/A (Goal achieved)
  • Progress List Explained

Saturday, January 23, 2010

Progress List, Explained

Some of the items listed in the "Progress to Date" section at the top of this blog may not be as self-explanatory as I had hoped. Here are definitions of the terms.

Original Loan Amount: This was the amount we financed when purchasing our home, not the amount we paid for it (we made a down payment, and also had a HELOC to bring us up to 20% equity to avoid paying PMI). This number ($204,000) obviously never changes.

Balance at Beginning of 5-year goal (1/1/08): This was the outstanding loan balance when we decided to start aggressively paying down the mortgage. The difference between the original loan amount and this amount ($188,983.82) came mainly from the portion of our regular monthly payments which was applied to the principal. Looking back, this amount seems paltry, since we only paid down the balance by $15,000 (even though we'd made over a year and a half of payments). This number is our goal starting point. This balance was covered by our first mortgage, which had a coupon of 6.0%.

Balance at Refinance in February 2009: We decided to refinance to cut our rate from 6.0% down to 4.625%, and reduced the term to ten years. The newer mortgage had an initial balance of $148,000.00.

Outstanding Balance: This is the amount we currently owe, as of the most recent mortgage payment. It changes (hopefully by growing smaller) from one month to the next.

Latest Payment Date: This is the last month we sent a mortgage payment (including any prepayments).

Latest Additional Principal Amount: This shows any amount contributed to the principal balance above and beyond our standard mortgage payment. It is my hope that this number is always at least $500.

Amount Ahead of Schedule (since refinance): This figure may not make much sense. I start with a standard amortization schedule for our ten-year loan, which excludes any prepayments. I then compare our current Outstanding Balance against the balance from the standard amortization schedule. This number represents the difference between the balance we have now, and the balance we would have had if we'd never paid anything above and beyond our required monthly payments. It's a combination of the extra principal we've paid out of pocket, along with our realized interest savings. Since I've used our refinance amount ($148,000) as the starting point for comparison, this number doesn't capture our total progress since January 2008.

Time Ahead of Schedule (since refinance): Again, I get this by comparing our current loan to the standard amortization schedule. Since we've made prepayments, our loan will be paid off ahead of the normal ten-year completion date. This shows how far ahead of ten years the mortgage will be dead.

Interest Saved Last Month: This is yet another number which I calculate by comparing our current progress against a standard ten-year amortization schedule. This shows the difference in what we paid for interest last month compared with what we would have owed in interest if we'd not made any prior principal reduction payments.

Total Interest Saved: This is the running total of the realized interest saved for each month going back to the beginning of our 5-year goal period. This is only realized interest, as there is a larger amount of unrealized interest savings compounding in the future. When we finally pay off the mortgage, we'll realize the rest of the savings.

Months Remaining in 5-year Goal: Counts down backwards from 60. One more month is deducted after we make each payment.

Average Monthly Principal Needed to Meet Goal: This is a simple calculation of the outstanding balance divided by the months remaining. This figure is the total principal needed, not just the extra amount we must add on top of our regular payment.

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