Glenmead Ledger

Loan settings

From the loan docs: FHA 20-year fixed. Only the P&I portion of each payment pays the loan down — taxes, insurance and MI go to escrow and never touch the balance.

Escrow — the part that isn't the loan

How this loan works

Everything here updates from the numbers on the Settings tab, so it stays right if the loan changes.

The terms, in plain English

Principal

The money actually borrowed — what's still owed. Everything else is a cost of borrowing it. This is the only number that paying extra moves.

Interest rate

per year, fixed. "Fixed" means it can never change for the life of the loan — the payment won't rise because rates rise. Interest is charged on whatever is still owed, recalculated every month.

P&I — principal & interest

a month. This is the mortgage itself. It's a fixed amount, but the split inside it shifts every month: early on it's mostly interest, later it's mostly principal.

Escrow

a month. Money the lender collects and holds to pay the property tax and insurance bills on your behalf. It is not loan repayment — it passes straight through. The lender does this because unpaid taxes can put a lien ahead of their mortgage.

Real estate taxes

a month. Set by the county, not the lender. This will drift up over the years and the escrow payment will rise with it, even though the P&I never changes.

Hazard insurance

a month. Homeowner's insurance. Required while there's a mortgage, because the lender needs the collateral protected. Also re-priced yearly.

Mortgage insurance (MIP)

a month. This one protects the lender, not you — it covers them if the loan defaults. It's the price of an FHA loan's low down payment. There was also an up-front premium of about $1,190 (1.75%) rolled into the balance at closing, which is why the loan started slightly above the purchase amount.

Term

20 years — 240 scheduled payments. A shorter term than the usual 30 means a higher payment but far less total interest.

Amortization

The schedule that splits each payment between interest and principal. See below — it's the single most important thing to understand here.

PITI

Principal, Interest, Taxes, Insurance — the whole monthly bill, . The number that actually leaves the account.

Why the early payments barely dent it

Each month, interest is charged on the balance still owed. What's left over after covering that interest is the only part that reduces the debt.

That ratio flips slowly as the balance falls. From then on more of each payment is going to the debt than to the bank.

Ways to pay it off faster

Every extra dollar comes straight off the principal, which erases all the future interest that dollar would have generated. That's why paying early is so much more powerful than paying later.

Highlighted row is the current setting. Figures rounded.

Round the payment up

The least painful version. Rounding to the next $50 or $100 costs little month to month and still pulls years off the end.

Throw windfalls at it

Tax refunds, bonuses, a good month on a side job. A lump sum applied early is worth far more than the same sum applied in year fifteen.

Pay every two weeks

Half the payment every fortnight is 26 half-payments a year — one extra full payment annually, almost unnoticed. Only do this if the servicer applies each half immediately rather than holding it; some don't, which makes it pointless.

Recasting

After a large lump sum, some lenders will re-amortize the loan: same rate, same payoff date, lower required payment. Useful if the goal is breathing room rather than speed. It's the opposite trade from prepaying.

Refinancing

Only worth it if rates drop meaningfully below , and only after weighing closing costs against the savings. On a balance this size the costs eat the benefit quickly, so the bar is high.

Things to watch

Say "apply to principal"

The biggest practical trap. Extra money sent without instructions often gets parked as unapplied funds or credited toward next month's payment — which buys none of the savings above. Confirm how the servicer handles it and check the statement afterward.

The payment will change, even though the rate can't

Escrow is re-analyzed yearly. If taxes or insurance rise, the monthly bill rises. If the escrow account runs a surplus or shortage, expect a refund or a catch-up charge.

Mortgage insurance may or may not fall off

On FHA loans this depends on the original down payment: with 10% or more down it ends after 11 years, otherwise it runs the full life of the loan. Worth confirming which applies — it's a month either way.

There's no penalty for paying early

FHA loans can't carry prepayment penalties, so there's no downside to overpaying whenever there's spare cash.

When not to prepay

Prepaying is a guaranteed return, which is genuinely good — but money in the house is hard to get back out. An emergency fund comes first, and so does any debt at a higher rate (most credit cards). Don't sink the cushion into the mortgage.