Use HELOC to paydown mortgage fast

415 Replies

@David Dachtera

David, I used the HELOC payoff scheme that you showed above and I can clearly see your mistake now. You're not accounting for the fact that you're paying more each month out of pocket. In fact, in the first 20 months, you'd be paying ~$6k more out of pocket than you would be making just the standard loan payments. THIS is why you are seeing such rapid payoffs. If you're paying more each month, you're going to pay it off quicker. This is a prepayment scenario that you've been describing, and we've been saying all along that we're NOT talking about a prepayment scenario. Of course it will payoff faster when you're throwing an extra $300+ per month at the total debt.

Originally posted by @Eric Jones :

@David Dachtera - so you just provided what the HELOC looks like for the first ten months while you're paying it down. Can you now provide what you think amortized loan balance looks like for those exact same ten months? We need to account for both in this analysis.

Ok. Let's see if the copy-and-paste works for the Vertex32 spreadsheet...

No. Due
Date
Payment
Due
Additional Payment Interest Principal Balance
150,000.00
1 1/1/16 632.41 0.00 375.00 257.41 149,742.59
2 2/1/16 632.41 0.00 374.36 258.05 149,484.54
3 3/1/16 632.41 0.00 373.71 258.69 149,225.85
4 4/1/16 632.41 0.00 373.06 259.34 148,966.51
5 5/1/16 632.41 0.00 372.42 259.99 148,706.52
6 6/1/16 632.41 0.00 371.77 260.64 148,445.88
7 7/1/16 632.41 0.00 371.11 261.29 148,184.59
8 8/1/16 632.41 0.00 370.46 261.94 147,922.64
9 9/1/16 632.41 0.00 369.81 262.60 147,660.04
10 10/1/16 632.41 0.00 369.15 263.26 147,396.79
11 11/1/16 632.41 2,367.59 368.49 2,631.51 144,765.28
12 12/1/16 632.41 0.00 361.91 270.49 144,494.79
13 1/1/17 632.41 0.00 361.24 271.17 144,223.62
14 2/1/17 632.41 0.00 360.56 271.85 143,951.77
15 3/1/17 632.41 0.00 359.88 272.53 143,679.24
16 4/1/17 632.41 0.00 359.20 273.21 143,406.04
17 5/1/17 632.41 0.00 358.52 273.89 143,132.14
18 6/1/17 632.41 0.00 357.83 274.58 142,857.57
19 7/1/17 632.41 0.00 357.14 275.26 142,582.31
20 8/1/17 632.41 2,367.59 356.46 2,643.54 139,938.77

 It's little goofy because when you paste from Excel in the forum software it drops empty cells. So, I had to put zeroes in to maintain the proper format.

There's the first two 10-month "chunks". Notice that between payments 1-11, the interest amount only goes down by pennies between payments. After the "chunk" goes in, it has gone down by about six-and-a-half dollars.

Now, remember - this is early in the mortgage repayment period. You don't start to see a major difference until later in the loan term.

Without acceleration, you pass the "50-50" point (where 50% of the payment goes to each of interest and principal) between the 83rd and the 84th payments, at the end of the 7th year.

Applying the "chunks", you pass the "50-50" point between the 50th and the 51st payments, 33 payments earlier, early in the 5th year.

Still with me?

@David Dachtera - Ok, now we're getting somewhere. Notice that the table you just pasted in matches my Scenario 2 exactly. Now checkout my Scenario 1 that I just attached the image of. This models BOTH the HELOC and the loan at the same time. We need to analyze both debts at the same time to really understand if/how this affects payoff.

@Eric Jones ,

Now, in the two posts you made while I was doing that, note again: you're only looking at a portion of the scenario. You need to continue on further to start seeing the benefit.

This works the way it works, not the way we might think it does. Ya gotta play out the scenario all the way to the end instead of "getting up and leaving early because the earlier part of the movie is too slow and boring".

I see you have the Easy-Excel spreadsheet. Fill it out all the way to the 360 payment mark (you won't need them all), keep applying the chunks every ten payments and watch what happens. It's actually easier with the Vertex32 spreadsheet - that's what I'm using here tonight.

Originally posted by @Eric Jones :

@David Dachtera - Ok, now we're getting somewhere. Notice that the table you just pasted in matches my Scenario 2 exactly. Now checkout my Scenario 1 that I just attached the image of. This models BOTH the HELOC and the loan at the same time. We need to analyze both debts at the same time to really understand if/how this affects payoff.

You actually can do that by going all the way to the end of the scenario. 

...and I've already posted that at least twice.

Thru 20 chunk payoff cycles, you'll pay $1,031 and change in interest to the HELOC (20 x $51.56).

Applying that to the total interest paid on the 1st mortgage produces a total interest savings of $34,612.05. (Note: That's a correction to last night's number which I re-used in error today. I was tired and my patience was wearing thin. I f-ed it up).

Whaddaya think?

There's the wound, Doubting Thomas! Put your hand in see for yourself.

...and I've been saying "EasyExcel. It's actually Excel-Easy. Mea Culpa.

I have a Renatus workshop tomorrow. So, I'm going to bed. Probably won't be back until sometime Sunday - social hours afterward.

@David Dachtera

So in scenario 1, all the debt (HELOC + Loan) is paid off at month 210. Under a normal repayment scenario, Scenario 2, the loan would still be at about $79K. But before you walk away excited, notice how much you paid in the 210 months in payments. Yes, you paid off Scenario 1 first, but you paid $192k in 210 months, while in Scenario 2 you only paid $133k.

So, as I and others have said, it's better just to prepay the loan directly, since that pays off in 205 months. 

So this really settles this whole debate and hopefully clarifies it to you. The ONLY reason you're paying it off quicker in Scenario 1 is because you are throwing a lot more of your money at debt each month. And you can see in Scenario 3 that if you want to rapidly payoff a loan, prepayment directly to the loan is the safest and most efficiency form of debt payoff, unless you're talking about transferring to a lower interest rate loan.

As I said, you've been misunderstanding all of us for a while. We were talking about a non-prepayment scenario. How you missed that in all of this dialogue is beyond me, but hopefully now it makes sense to you. I'd be happy to send you the excel file if you'd like.

@ericjones I have heard to something similar to which you are speaking. I attended a seminar at a local REIA and they talked about using debt as a "weapon" to get out of debt faster (thus paying off your mortgage early). They talked about using HELOC, credit cards, personal lines of credit, business loans etc using all types of debts as a weapon to pay off mortgages early. I liked the presentation however, they wanted to mentor you through out the process and charge $300 a month to show you how to do it.

Here is a youtube video from the presenter. Please let me know if you use the debt strategy and if it works for you. 

@Rhondalette W. No this is a scam to sucker you out of $300 per month and will get you further in debt. Mortgage pay down is fine but make extra principal payments with cash. If you want a guru you can trust I suggest Dave Ramsey and take his program. He has a safe way to pay down debt.

@Rhondalette W. - if they are proposing that you use a "debt weapon" like a bank account, I'd stay away from it. Instead just apply your excess cash directly to the loan as a prepayment. It might take a while, but reading through this thread might be valuable for you.

@Joe Au

A HELOC has an interest rate that is adjustable...... You still have to pay that money back. You just may end up paying back a higher interest rate. Instead of that, if you really wanted to pay additional money on your actual mortgage payment. The interest is so much in the beginning, because the balance is so high, the interest decreases because the balance decreases. It is the same idea with a HELOC, you pay interest on the balance....... But now you are opening yourself up to a possible increase in your rate, as it is adjustable and can go up.

This is my first post on BP ever, and I would never imagine it will get more than 100 replies. I came across a book on amazon called "How to own your home years sooner & retire debt free" by Harj Gill. It got great reviews and everyone said it's working for them. The method came from other countries(Australia, UK. Canada, etc...). That's why I brought this topic here to ask a bigger community.

My personal take on is this method rely on the cash management between accounts to minimize the daily average balance so that the interest will be reduced. Another must have requirement is to have positive cash flow. The extra cash flow will act as prepayment as everyone is talking about. And because it's a LOC, cash can move in and out from it "freely". That's why it sort of replace the need for a checking account.

Every tool has it's function. You can say a knife is dangerous because it can cut yourself with it. But if you give it to a chef, he can create wonderful culinary dishes. whether you chose to use it or not, it's totally up to you. But always get educated, numbers don't lie.

Thanks again for everyone's input.  

Originally posted by @Joe Au :

Every tool has it's function. You can say a knife is dangerous because it can cut yourself with it. But if you give it to a chef, he can create wonderful culinary dishes. whether you chose to use it or not, it's totally up to you. But always get educated, numbers don't lie.

Um. I'm confused.  Are you saying you have superior skills to make this scheme work?

Originally posted by @David Dachtera :
Originally posted by @Eric Jones:

@David Dachtera - Ok, now we're getting somewhere. Notice that the table you just pasted in matches my Scenario 2 exactly. Now checkout my Scenario 1 that I just attached the image of. This models BOTH the HELOC and the loan at the same time. We need to analyze both debts at the same time to really understand if/how this affects payoff.

You actually can do that by going all the way to the end of the scenario. 

...and I've already posted that at least twice.

Thru 20 chunk payoff cycles, you'll pay $1,031 and change in interest to the HELOC (20 x $51.56).

Applying that to the total interest paid on the 1st mortgage produces a total interest savings of $34,612.05. (Note: That's a correction to last night's number which I re-used in error today. I was tired and my patience was wearing thin. I f-ed it up).

Whaddaya think?

There's the wound, Doubting Thomas! Put your hand in see for yourself.

...and I've been saying "EasyExcel. It's actually Excel-Easy. Mea Culpa.

I have a Renatus workshop tomorrow. So, I'm going to bed. Probably won't be back until sometime Sunday - social hours afterward.

I was finally able to fully model this out. I did the same 2 scenarios as David and Eric, except I applied the 3% interest rate to both the HELOC and the mortgage. My intention is to demonstrate how this works with all variables being the same.

Ironically, using the HELOC to pay "chunks" over 3k every 10 months actually results in a longer overall payoff and more interest due to timing of the payoff of the final chunk.

Scenario 1: Mortgage + HELOC

Payoff: 210 months, Total Interest: $42,075 

Scenario 2: Mortgage + additional mortgage payments matching HELOC payments from scenario 1

Payoff: 206 months, Total Interest: $41,856

Here's a link to the Excel file. I converted it from Google Sheets and I can see a few formatting issues so sorry in advance.

The columns with the red header are scenario 1, and the green header are for scenario 2.

https://www.dropbox.com/s/gzvdujsmx9b5si9/Mortgage...

I hope this finally puts the matter to rest.

Originally posted by @Joe Au :

This is my first post on BP ever, and I would never imagine it will get more than 100 replies. I came across a book on amazon called "How to own your home years sooner & retire debt free" by Harj Gill. It got great reviews and everyone said it's working for them. The method came from other countries(Australia, UK. Canada, etc...). That's why I brought this topic here to ask a bigger community.

My personal take on is this method rely on the cash management between accounts to minimize the daily average balance so that the interest will be reduced. Another must have requirement is to have positive cash flow. The extra cash flow will act as prepayment as everyone is talking about. And because it's a LOC, cash can move in and out from it "freely". That's why it sort of replace the need for a checking account.

Every tool has it's function. You can say a knife is dangerous because it can cut yourself with it. But if you give it to a chef, he can create wonderful culinary dishes. whether you chose to use it or not, it's totally up to you. But always get educated, numbers don't lie.

Thanks again for everyone's input.  

 Joe:

I have never read Mr. Gill's book, but if it is proposing the same scheme as Mr. Dachtera was championing here, it is even less attractive in countries were mortgage terms are far shorter than the amortization (i.e. almost anywhere but the U.S.A.).   In Canada, for example, the average mortgage term is 5-years, so every 5-years you renew your mortgage and have the opportunity to pay down as much as you would like (if you wanted to pay more than the payment restrictions of a fixed-rate mortgage).

If you want to pay down your mortgage more quickly and cannot afford to increase your payment, simply switching from the default monthly mortgage payment to accelerated bi-weekly payments will reduce your amortization by ~12% (the extra payment per year from the accelerated part) and reduce the overall interest paid by slightly more (~14%).

Naturally, if you increase the bi-weekly payment, you will pay down the mortgage more quickly.   In the example of this thread we have a monthly mortgage payment of $632.41 with an additional monthly principal payment of $300.  If you were to switch this mortgage to accelerated bi-weekly payments ($316.20 + 150) you amortization would be cut by ~48.5% and the amount of interest paid reduced by ~52%.

There is no special sauce, paying more principal, more often, starting earlier in the life of the note is how you avoid the most interest.

Now that we have that settled and all agree transferring debt does not change anything for the better I want to propose HOW to ACTUALLY MAKE this SCHEME work.  Yeah call me crazy.  

I'm going to make some assumptions:

Normal Person A

take home pay of $10,000 per month, gets paid on the 1st

spends $10,000 per month, pays everything on the last day of the month

pays loan off the standard way over 30 years, 150,000 3% 30years

Scheme Person B

same as above but now he decides to take out a HELOC @ 3%.

When he gets paid, he immediately puts the 10,000 into his mortgage and therefore has 0 Cash in the bank (but has $10,000 less on his mortgage).

On the last day of the month he withdraws from the HELOC 10,000 to pay his bills.

When he gets paid on the 1st of the next month he pays the HELOC off to 0.

He continues this until the mortgage is paid off.

Doing this he will pretty much always have a $10,000 less debt balance then Person A (except for 1 day a month).

Which would save $300 per year interest or $25 per month.

This would pay the loan off about 21 months earlier and save about $5,000 in interest over the LIFE of the loan.  

In this IDEAL situation the savings is minimal.  Not to mention way to complicated to realistically execute.  

It works because you are not transferring debt, you are transferring your earned cash for 29 days at a time.

MYTH BUSTED

@Mike Landry It works! not for the average JOE.... It also works because now if you have a HELOC for 100k not all your equity is not trapped paying off the note early. If you used the system to pay off your house it teaches you nothing but how to not spend your money with the goal in mind to pay off your house!!!!! That's it!! For me it worked in that manor. ( your spending habbits change when the money is directly from your house) Most people will not save 10k and then if they did they wouldn't pay off their house. Make sure to use the HELOC to buy other property ( once you see the results you will want to do it again and again) and you can have some benefit of using it as a checking account... Very minimal savings yearly unless your warren buffet. However the credit card bonus points trip to hawaii every 3 years for free thats a 3500.00 value!!! worth it!!!! Moral of the story and my personal take away from doing it, budget well and don't spend your money on liabilities (primary home) and buy assets (rental property)..... PLEASE PLEASE PLEASE do not spend 5k for this secret trick! It's all in books for free! best of luck

Updated over 3 years ago

here is the book that tought me for free about the heloc... "Own your home years soon without making any extra payments" I don't know of any books on how to use it to buy rentals. if anyone knows of any I would love to read it.

@Account Closed

Brent, it is great that it changed how you look at and value you hard earned $$$.  That is awesome.  But the truth is you don't need this scheme to change how you look at and value $$$.  

Even if you had a HELOC for $100,000 or 1,000,000 it does not benefit you any more. Your limiting factor is the amount of INCOME you can do this with and for HOW LONG you can do it. So if you made $10,000 a month your maximum benefit is $25 per month. If you make $5,000 per month your maximum benefit is $12.50 per month. And if you can't go 29 days without tapping the Heloc the numbers decrease even more. Those credit card points are looking like more of a bonus...

Use a HELOC to buy more property. Don't use a HELOC to do this!

@Mike Landry benefit of larger heloc is more access to equity for down payments/bigger projects. Yep we are on the same page... More the income the more it saves monthly.. Glad someone agrees it works just not a secret to pay 5,000.00 for. I'd hate to see people attempt this after reading the book and not have a savings with all their money dumped into their primary home. Never wanting to grow their wealth. I think Rich Dad Poor Dad should be be mandatory read

Originally posted by Account Closed:

@Mike Landry It works! not for the average JOE.... It also works because now if you have a HELOC for 100k not all your equity is not trapped paying off the note early. If you used the system to pay off your house it teaches you nothing but how to not spend your money with the goal in mind to pay off your house!!!!! That's it!! For me it worked in that manor. ( your spending habbits change when the money is directly from your house) Most people will not save 10k and then if they did they wouldn't pay off their house. Make sure to use the HELOC to buy other property ( once you see the results you will want to do it again and again) and you can have some benefit of using it as a checking account... Very minimal savings yearly unless your warren buffet. However the credit card bonus points trip to hawaii every 3 years for free thats a 3500.00 value!!! worth it!!!! Moral of the story and my personal take away from doing it, budget well and don't spend your money on liabilities (primary home) and buy assets (rental property)..... PLEASE PLEASE PLEASE do not spend 5k for this secret trick! It's all in books for free! best of luck

On what basis are you saying this "works"? I don't think I fully understand your comment. Are you just saying it forces you to pay down your mortgage faster? In that case, I suppose your could say that.

We've proven unquestionably though that there is nothing about this scheme that can't be done by just paying the exact same amount as an extra payment directly to your mortgage every month.

Maybe it forces discipline, but it doesn't "work" in the sense of the originally posted question.

@Chris May Ok....... we are arguing the same thing. It works because it forces dicipline!!!!! (Pre Payment works wonders on the amortization schedule. )Also if you insist on paying off your home your equity is not in a sense trapped with no access. If your game plan is to pay it off with prepaying all your money you absolutely need a HELOC however don't need to use. Emergency only. This gives you immediate access to the equity you have been putting against your home to pay it down rather then it being trapped. If someone pays 5k for the knowledge yes it is a scheme to leverage what their parents taught them and thinking paying off their home is a good thing. However if someone reads this bigger pockets thread entirely and sees the benefits after seeking their own knowledge through the many books recommended on bigger pockets. I think they can unlock something special that will subconsciously create them not to spend and focus on creating wealth to set them free from the 9-5

I think that you are trying to make the HELOC look bad. I think what should look bad here is paying off your primary home and trapping all your money. At least the HELOC sets it free!!! For the folks that insist on paying it off after listening to dave ramsey and suze orman. A HELOC is needed and if budgeting well and sticking to the plan it will work, and truly is the fastest way to pay off the home with anyone's positive monthly income. As you can place 10k heloc+ savings+ checking against the note today vs waiting years! Also use your monthly income/debt to your full advantage. As I stated before it is not the safest with no savings that would scare me to death. This also does not create weallth. HELOC dosn't deserve to be a bad name

 

Well, the nay-sayers are bound and determined to promote their viewpoint, no matter how much the evidence contradicts them. So be it...

@Eric Jones ,

If that works for you, great!

Personally, I would prefer to use the HELOC approach. Here's why:

Let's say I can get a HELOC with a $30,000 limit, interest only at 3.75%, and every ten months I apply a $10K "chunk" to my 30-year, 3%, $150K 1st mortgage.

Now, that may only take 6 or 7 chunks 10 months apart assuming I can repay that much that quickly. (70 months is not quite 6 years achieving the "payoff in seven years" goal, easily.)

$10K out of my $30K line is only about 34% utilization maximum after I take each chunk. That's good for my credit profile and supports a healthy score. I take the money and repay it in 10 months a few times. That also looks good on my credit profile and supports a healthy score.

Having both the home loan and the HELOC on my credit profile helps give me a diverse mix of credit which also supports a healthy score.

Now, that's what I would do and why I would do it if it worked for me.

The reader's "mileage" may vary, of course.

Originally posted by Account Closed:

@Chris May Ok....... we are arguing the same thing. It works because it forces dicipline!!!!! (Pre Payment works wonders on the amortization schedule. )Also if you insist on paying off your home your equity is not in a sense trapped with no access. If your game plan is to pay it off with prepaying all your money you absolutely need a HELOC however don't need to use. Emergency only. This gives you immediate access to the equity you have been putting against your home to pay it down rather then it being trapped. If someone pays 5k for the knowledge yes it is a scheme to leverage what their parents taught them and thinking paying off their home is a good thing. However if someone reads this bigger pockets thread entirely and sees the benefits after seeking their own knowledge through the many books recommended on bigger pockets. I think they can unlock something special that will subconsciously create them not to spend and focus on creating wealth to set them free from the 9-5

I think that you are trying to make the HELOC look bad. I think what should look bad here is paying off your primary home and trapping all your money. At least the HELOC sets it free!!! For the folks that insist on paying it off after listening to dave ramsey and suze orman. A HELOC is needed and if budgeting well and sticking to the plan it will work, and truly is the fastest way to pay off the home with anyone's positive monthly income. As you can place 10k heloc+ savings+ checking against the note today vs waiting years! Also use your monthly income/debt to your full advantage. As I stated before it is not the safest with no savings that would scare me to death. This also does not create weallth. HELOC dosn't deserve to be a bad name

 

Brent - Sorry, I think I'm just worn out from this conversation haha. For what you're describing it works for what it is. I was picturing us doing another round of 100 comments proving it doesn't do what others are claiming.

HELOCs are just fine! I have one myself.

Originally posted by @David Dachtera :

Well, the nay-sayers are bound and determined to promote their viewpoint, no matter how much the evidence contradicts them. So be it...

@Eric Jones ,

If that works for you, great!

Personally, I would prefer to use the HELOC approach. Here's why:

Let's say I can get a HELOC with a $30,000 limit, interest only at 3.75%, and every ten months I apply a $10K "chunk" to my 30-year, 3%, $150K 1st mortgage.

Now, that may only take 6 or 7 chunks 10 months apart assuming I can repay that much that quickly. (70 months is not quite 6 years achieving the "payoff in seven years" goal, easily.)

$10K out of my $30K line is only about 34% utilization maximum after I take each chunk. That's good for my credit profile and supports a healthy score. I take the money and repay it in 10 months a few times. That also looks good on my credit profile and supports a healthy score.

Having both the home loan and the HELOC on my credit profile helps give me a diverse mix of credit which also supports a healthy score.

Now, that's what I would do and why I would do it if it worked for me.

The reader's "mileage" may vary, of course.

Mr. Dactera:

It is not nay-saying, it is mathematics.

Using the Vertex 42 Home Mortgage Calculator spreadsheet, I have uploaded a spread sheet for each of the below scenarios and included links to the spreadsheets below:

Scenario 0: 

This is the base case for the mortgage pre-payment examples. Here we have a mortgage note of $150,000.00 at 3.0% compounded monthly with a 30-year amortization and monthly payments of $632.41.  A total of $77,665.33 in interest is payed over the life of the mortgage note.

        

Scenario 1:

In this scenario we take the base case mortgage presented in the Scenario 0 spreadsheet and apply a lump-sum principal payment of $3000.00 every 10-months starting in month 10.

The result is the effective amortization is reduced to 17.5 years and the total interest paid is reduced by $34,633.44 (44.6%)

This is the scenario for which you cut-n-pasted a section of amortization table above, with the variance that I used a lump-sum principal payment of $3000.00 every 10-months and not one of  $2367.59.   This makes the pay down a little more rapid.

        

Scenario 2:

In this scenario we take the base case mortgage presented in the Scenario 0 spreadsheet and apply an additional monthly principal payment of $300.00.

The result is the effective amortization is reduced to 17.25 years and the total interest paid is reduced by $35,546.14 (45.8%).

As you see, applying the $300/month directly to the principal of the mortgage every month from the beginning of the mortgage provides a greater reduction in the length of the repayment and total interest paid.

     

Scenario 3:

In this scenario we take the base case mortgage presented in the Scenario 0 spreadsheet and a lump-sum principal payment every 10 months commencing at the beginning of the mortgage (month 1).

The result is the effective amortization is reduced to 16.92 years and the total interest paid is reduced by $36,456.04 (46.9%).

This is an improvement on the approach you advocate and amortization table snippit posted above.   It presumes you make your first lump-sum principal payment in the first month.  This is only a modest improvement over the results of Scenario 2 and, if you were pulling the $3K lump-sum from a LoC as you initially proposed, there would be a negligible difference (<$100).

           

Scenario 4:

In this scenario we take the payment in Scenario 2 - $632.41/month base payment and $300.00/month additional principal payment and switch to bi-weekly payments of $291.68 with an additional principal payment of $150.00 {this results in an additional principal payment of $300/yr over Scenario 2}.

The result is the effective amortization is reduced to 16.62 years and the total interest paid is reduced by $37,212.60 (47.9%).

    

Scenario 5:

In this scenario we take the payment in Scenario 2 - $632.41/month base payment and an additional principal payment of $300.00/month and switch to accelerated bi-weekly payments of $316.20 with an additional principal payment of $150.00 {this results in one additional payment of $632.41 + $300.00 per year}

The result is the effective amortization is reduced to 15.5 years and the total interest paid is reduced by $40,108.04 (51.6%).

So for one extra payment of $932.41 / year, you achieve a 5.8% further reduction in total interest paid.

            

Summary:

The math speaks for itself.  Rather than waiting 10-months to make a $3000.00 lump-sum payment, you are better off making an extra principal payment of $300.00/month on the mortgage note.

If it so happens that your above cut-n-paste amortization table was suppose to have the lump-sum payment take place in month 1 (ie. Scenario 3), the you could come out marginally ahead of making monthly extra principal payments of $300.00, provided you were not pulling the lump-sum from a LoC and then repaying the LoC over the ensuing 10-months ... as the additional interest would negate the marginal advantage.

Scenario 4 and {my favourite} Scenario 5 were included to illustrate the benefit of more frequent principal payments.

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