Should I Pay Extra on the Mortgage Principal?

I’ve been paying extra on the mortgage for a year and a half now — I always pay at least $25 extra a month toward our mortgage principal, with a few months of an extra $50, up until our escrow payment increased $100/month this past August, after which I just rounded up to a nice, even number and paid an extra $23.

Fast-forward to last week, when we received an escrow disclosure statement/notice of new mortgage payment in the mail from our mortgage company. The good news is it indicates that starting in February, our total mortgage payment (which includes an escrow payment for property taxes and homeowners insurance) will decrease by $46 per month.

But with Baby Frugalista scheduled to arrive in early March, I’m wondering if that money would be better spent on, well, things for the baby. She’ll require diapers, wipes, and possibly formula if nursing doesn’t work out the way I hope. These items will alter our budget. Then there’s the savings account(s?) I want to open for her.

Another consideration is that I plan to stay home for 6 months after the baby is born, which means I’ll only be receiving 66% of my pay for 12 weeks or so, then nothing for the next 3 months. So our finances will be squeezed as it is — why make it worse by “spending” $25-$50 on an additional mortgage principal payment?

5 comments to Should I Pay Extra on the Mortgage Principal?

  • Planning ahead in a separate account sounds like a wise idea to me. I am in a similar boat, except instead of the mortgage, I have a student loan the size of a mortgage. I find it best to handle things that I need to handle now, when I have pay periods where I have some excess cash laying around, I can add it towards the principle for that payment. The baby will thank you later!

  • Yeah, I agree. Things need to be reprioritized now that you have a baby due in March. I would put the extra money you have for mortgage payments and start saving up, even start his or her savings fund.

    That’s the cool thing about personal finance, I suppose. It really makes you evaluate what you want to spend your money on. Very personal indeed!

    • Penny

      @Y&T: Seems the safest bet, for now. If we find we’re doing really well with the added baby expenses, I can always make an additional principal payment here and there.

  • Before you stop doing what you are doing I would ask if the $120 (which is what you’ll save by doing this until Baby Frug is around) will make a difference? If not do what you are doing or will $120 make a difference on a different debt?

  • Penny

    @Evan: It’ll bring down the mortgage principal a bit. I’m just looking at saving that bit of cash to better to pad our savings, from now until we’re on a better financial footing after the baby comes. We don’t have any other debts except the car loan. That’s at 0%, so I’m not concerned with paying it off faster — no interest-saving advantage there. If we don’t wind up needing this extra money in our budget, I can always put it toward the mortgage principal in a lump sum to “catch up.”

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