Mortgage payment question

[britfish]

We are looking in to refinancing our home and were hoping to go to a 20 year loan but there is only a 15 and 30 year available. We can't afford the 15y payment. The agent told me that if we went to a 30 year loan it would drop our payments and if we paid one extra payment a year it would reduce the time of our mortgage by 10 years because it goes to the principal.
Is this right? Is there some type of formula (or mortgage calculator type thing) to help me see how much our extra payments would help us lower the duration.

 

[BrettS]

We are looking in to refinancing our home and were hoping to go to a 20 year loan but there is only a 15 and 30 year available. We can't afford the 15y payment. The agent told me that if we went to a 30 year loan it would drop our payments and if we paid one extra payment a year it would reduce the time of our mortgage by 10 years because it goes to the principal.
Is this right? Is there some type of formula (or mortgage calculator type thing) to help me see how much our extra payments would help us lower the duration.

Here is one calculator that can help you with that calculation...

http://www.decisionaide.com/mpcalculators/ExtraPaymentsCalculator/ExtraPayments1.asp

If you google "Mortgage prepayment calculator" you can find others as well.

Just for fun, I put in my mortgage information and added one extra payment every year in the 12th month. It showed that I would reduce the term by 6.8 years.

 

[Praying Colonel]

It will pay off faster--how much faster depends on your loan terms.

A good article explaining it is linked here.

 

[C_leen]

Hello there-

Bankrate.com has calculators. You can figure out all sorts of extra payment scenarios. What we do is pay a set amount over our actual payment each month, so the 'extra' just became part of our budget.

Best of luck to you! I hope you get a great % rate!

 

[britfish]

thanks for all your suggestions, I was able to really see the savings of the extra payment. I think we will go for it! Thanks again!