Extra payment to principal may not dent monthly payments

Payment flexibility depends on type of mortgage

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Many borrowers would like a mortgage on which the monthly payment would drop following a large payment to principal. They may have highly irregular income, or they may anticipate coming into a large sum of money from a bonus, bequest or insurance settlement. Mortgages fall into four categories with regard to how responsive they are to this need. Standard fixed-rate mortgages (FRMs) are the least responsive. Next come standard adjustable rate mortgages (ARMs), then any FRM or ARM with an interest-only option, and finally the Home Ownership Accelerator (HOA), which is the most responsive. Fixed-rate mortgages: Extra payments on an FRM shorten the payoff period but do not affect the monthly payment. For example, if you borrow $100,000 for 30 years at 6 percent, your fully-amortizing payment is $599.56. Pay this amount every month, and you pay off the loan in 30 years. If you make an extra payment of $10,000 in month two, your payment in month three and all subsequent months remains $59...