If I pay down my mortgage, without refinancing or recast, will that still reduce the total amount paid in interest?

I owe $230k on my mortgage, 4.7%. I am now able to pay it down by $30k - 40k extra per year. I prefer not to refinance (cost is $6500 and it's still in-person signing during the pandemic, though it would go to 2.85%) or ask for a recalculation or recast (cost is $500 - don't really want to spend the money). Do they still charge me interest on $230k? They didn't give me a clear answer over the phone - they wanted me to do a recast (TMS). Like, what if I paid the mortgage down to 1 dollar. Do they still charge me interest on 230k until I pay off that last dollar? Or hopefully do they check the mortgage principle balance each month and charge interest only on the balance? Obviously I do not want to pay interest on money I paid back already. My monthly payment will be the same (that's ok with me), but shouldn't more of it go to pay the principle if there is less going to interest.

3 Answers

Relevance
  • 2 months ago
    Favorite Answer

    Interest is recalculated monthly based on the outstanding balance.

    So, yes, if you pay any additional principal, you will reduce the interest paid and shorten the length of the mortgage.

  • Judy
    Lv 7
    2 months ago

    yes it will ..........................................

  • Eva
    Lv 7
    2 months ago

    The interest changes monthly as the principle reduces. If you ever looked at your mortgage statements, you would know that. The recast could save you a lot more than the $500 fee.  Use the calculator at the end of this article: https://www.bankrate.com/mortgages/what-is-mortgag...

Still have questions? Get your answers by asking now.