mortgage help?

kidconnor

55gallon hog
Mar 16, 2005
5,371
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brooklyn
#1
Ok so I am a little over a year into my mortgage. 30 year @ 6.3%. For the last 5 months or so I have been putting an extra 100 down towards the principle. Not alot but I heard this is supposed to be a good thing. Thing is I don't know why. I am supposed to be coming into a sizeable return from work in a couple of months.. about 12 grand or so and was thinking of putting some of that towards my principle. BUT once again I don't know what that will solve or how it would help me.

I feel like a moron when it comes to this stuff. Can someone explain to me, in retard terms, how this helps and how I would actually SEE the rewards from this.. or cons..




Note to young 'uns.. enjoy life NOW. not saying it sucks that much when you get older but but less responsibility = more gooder..
 

demonseed

Lingering since 1999
Oct 4, 2004
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#2
Well first thing you have to make sure of is that in your mortgage agreement you dont have an "prepayment penalty". If you have a prepayment penalty clause, you might as well just pay the minimum if you plan on staying in the house the entire length of the 30 year mortgage..

If you dont have a prepayment penalty clause, then yes, what you are doing is good. The rule of thumb is that if you make one extra full mortage payment a year for a 30 year mortgage, you will have your mortgage paid off somewhere between 6 and 7 years early. Just make sure that the bank knows to put the extra money into your principal. Some banks will put it towards your interest if you dont specify to put it toward the principal.
 
Jul 26, 2005
10,362
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Central PA
#3
The more you pay sooner the better. The interest accrues off of the remaining principal balance. The lower you get the principal earlier in your loan the more you save later. Paying an extra payment a year based on your term and interest rate will alone cut 3-5 years off of your loan.
 

HummerTuesdays

Another girrrrl!!!
Apr 24, 2005
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#4
I absolutly agree. If you're not into math, it's a bit boring & confusing, but trust us when we say paying down the mortgage is a good thing. It'll save you boatloads of interest.

The reward you'll see is the principle balance being paid off in a lot less than 30 years. How much less depends on how much extra you're paying, but you're definitely shaving YEARS off your mortgage.
 
May 7, 2003
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Hicksville NY
#5
Your just lucky you got locked in at 6.3%....The mortgage buisness especially the sub prime is fucked beyond belief right now...My brother left his job this week as a senior loan officer.

Like these guys were telling you its always good to pay extra off your mortgage save you money in the long run..

I don't think you have a pre-payment penalty considering your low rate..

You sound like an A paper mortgage 660 fico score and above


Here's a mortgage calculator you might wanna play with... http://www.bankrate.com/brm/mortgage-calculator.asp
 

demonseed

Lingering since 1999
Oct 4, 2004
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#6
Yeah the sub prime is in shambled. Luckily, I was fortunate enough to get 5.95% 30 year fixed, just 4 months ago.
 
Jul 26, 2005
10,362
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Central PA
#7
The foreclosures are what is killing the housing market right now. Too many banks gave money to people who couldn't afford the payments or sold them ARM(Adjustable Rate Mortgage) loans and when the payments went up they couldn't make them. IMO there was a lot of predatory lending going on mixed with consumer irresponsibility and now everyone is paying for it.
 

demonseed

Lingering since 1999
Oct 4, 2004
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Morris Plains, New Jersey
#8
The foreclosures are what is killing the housing market right now. Too many banks gave money to people who couldn't afford the payments or sold them ARM(Adjustable Rate Mortgage) loans and when the payments went up they couldn't make them. IMO there was a lot of predatory lending going on mixed with consumer irresponsibility and now everyone is paying for it.

QFT
The development I live in just had an HOA meeting about this. There are 280 houses in our development, and 10 have been foreclosed on in the past 6 months. Most of the foreclosures were ARM's.
 
May 7, 2003
4,122
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531
Hicksville NY
#9
The foreclosures are what is killing the housing market right now. Too many banks gave money to people who couldn't afford the payments or sold them ARM(Adjustable Rate Mortgage) loans and when the payments went up they couldn't make them. IMO there was a lot of predatory lending going on mixed with consumer irresponsibility and now everyone is paying for it.

Nail on the head my friend....I was responsible for selling some of those arm's for a while....2 pts in front.....2 in the back :)
 
Jul 26, 2005
10,362
1
0
Central PA
#10
I am an independent closing agent and I remember a lot of loans I closed wondering to myself how the hell the people were going to afford the payments. A lot of them were eyeball deep in credit debt and were putting the equivalent of a band-aid on a gaping chest wound. But the mortgage companies made off with the closing fees and points and everything was just dandy. Until the fucking bottom fell out.
 

Sparkstalker

Registered User
Mar 23, 2006
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#11
Yeah, the glut of housing is going to hit me in the ass soon...we're building a house, and a dead the thought of it going up for sale in a saturated market...hopefully things will turn around in the next six months or so.
 
Jul 26, 2005
10,362
1
0
Central PA
#12
Yeah, the glut of housing is going to hit me in the ass soon...we're building a house, and a dead the thought of it going up for sale in a saturated market...hopefully things will turn around in the next six months or so.
they always do.
 
Jul 26, 2005
10,362
1
0
Central PA
#14
is it true if you make your loan in 2 payments a month you pay your mortgage off faster

only if you pay extra. most companies try to sell you those BS bi-weekly payment plans(which they charge you for). The way they work is they pay a half payment every other week. Two months out of the year you pay 3 payments which equals one whole payment. All you need to do is take one mortgage payment and divide it by 12 and add that amount to your monthly payment and it does the same thing.
 

Fruit Monkey

Don't stare at it eat it! P-1 In trainning
Oct 4, 2004
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Intransit
#15
OMG ok the short and simple version

By making 1 xtra payment a year it goes like this

Orig mort amount and payment is based on say 300,000k payment is about 1900.

So if u pay 1900 to your loan amount once a year u now borrowed 298,100 and your payment would be say 1895 so an xtra 5 per month is now paying it down first month 5 second 5.01 ETC AND SO ON. works best if you do it with your first payment,

See they cant have u come in and redo a mort so its your way of fucking them back just a lil bit,,

If im wrong which i doubt being it was described to me by some one in the biz for many years like 20 plus, but if i am wrong ignore what i said and go buy a big life INS policy and a fast BIKE
 

Creasy Bear

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Mar 10, 2006
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#16
Yeah, the glut of housing is going to hit me in the ass soon...we're building a house, and a dead the thought of it going up for sale in a saturated market...hopefully things will turn around in the next six months or so.
Ain't gonna happen... we're in this slump for the long haul. Too many shenanigans were going on that led up to this... subprime hijinks, mega builders overbuilding like mofos and saturating the market, predatory lending, crazy overinflated house values, etc...

The market was being willfull, and now it is being corrrrected. Trust me... you're not even going to see a peep of light at the end of this tunnel until somewheres around late 2009 at the earliest... probably more like 2010-11.

I recently moved to the Indianapolis area, and I resisted the urge to buy. I'm currently renting. I'm sitting on a huge pile of scratch from a house I house sold on Long Island, NY... luckily, just as the bubble was starting to burst.

I'm like a kid in a candy store here... I got a great rental house for a song (The owner is trying to ward off foreclosure by renting), I'm making more money off my money, home prices keep falling, the market keeps saturating, and these stupid ass builders keep building... they don't know what else to do, I guess.
 
Jul 26, 2005
10,362
1
0
Central PA
#17
Ain't gonna happen... we're in this slump for the long haul. Too many shenanigans were going on that led up to this... subprime hijinks, mega builders overbuilding like mofos and saturating the market, predatory lending, crazy overinflated house values, etc...

The market was being willfull, and now it is being corrrrected. Trust me... you're not even going to see a peep of light at the end of this tunnel until somewheres around late 2009 at the earliest... probably more like 2010-11.

I recently moved to the Indianapolis area, and I resisted the urge to buy. I'm currently renting. I'm sitting on a huge pile of scratch from a house I house sold on Long Island, NY... luckily, just as the bubble was starting to burst.

I'm like a kid in a candy store here... I got a great rental house for a song (The owner is trying to ward off foreclosure by renting), I'm making more money off my money, home prices keep falling, the market keeps saturating, and these stupid ass builders keep building... they don't know what else to do, I guess.
There is a general slump but it also depends on the region. Some places are continuing to see a boom in the local housing market despite the overall trend. Location, location, location...ech.
 
Feb 20, 2006
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**** Island
#18
There is a general slump but it also depends on the region. Some places are continuing to see a boom in the local housing market despite the overall trend. Location, location, location...ech.

Very true. The housing market here is still humming along nicely. Kinda sucks though since I'm looking to buy a bigger house.
 

Creasy Bear

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#19
Very true. The housing market here is still humming along nicely. Kinda sucks though since I'm looking to buy a bigger house.
True dat... all of the New Yorkers fleeing down south are probably keeping price and demand up down in NC.

Like the man said... location, location, and... er... um... What is the third? I can never remember that last one.
 

jackjack

Registered User
May 12, 2007
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#20
Location, condition and price.

Hate seeing the first one repeated and the other two important ones left out.

Should 'ethnicity of neighbors' be in the top three? That could trump price for many.
 

HummerTuesdays

Another girrrrl!!!
Apr 24, 2005
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#22
only if you pay extra. most companies try to sell you those BS bi-weekly payment plans(which they charge you for). The way they work is they pay a half payment every other week. Two months out of the year you pay 3 payments which equals one whole payment. All you need to do is take one mortgage payment and divide it by 12 and add that amount to your monthly payment and it does the same thing.
I lucked out and got the fee waived when I signed up for the Wells Fargo Equity Enhancement program and even better it's lifetime membership and doesn't matter what company my mortgage is with. The way it works is like this: I got paid every other Friday, and on the following Monday they took 1/2 of my monthly payment out of my checking account. On the first of the month, they'd take what they collected & pay my mortgage. Some months I'd be paid 3 times, and that extra would go towards my principle.

At my current job we get paid every Friday, so I have 1/4 of my monthly payment deducted every Monday. The Equity Enhancement program sits on my money until the 1st of the month when the mortgage payment is due. My mortgage isn't getting paid weekly, so I'm not getting any benefit from the timing, other than the outflow is as consistent as the inflow. But I am making an extra payment over the course of the year.
 

Jolie

Filthy Liberal
Aug 25, 2002
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#23
I have an excel spreadsheet that allows you to put in your loan amount, interest rate and any additional principal you choose to pay and it will show you the exact effect on your bottom line, including how much you will save over the life of the loan and when you will be done paying.

If you are interested, tell me your details and I can calculate it for you. It would help to know approx. WHEN you made the extra payments, but I dont really *need* that.
 

kidconnor

55gallon hog
Mar 16, 2005
5,371
1,144
678
brooklyn
#24
i appreciate all the input. But thing is its only a Co-op. Getting married in 2 years and probably gonna look for a house. I get the part about the early pay off. but being that I am selling soon does it help me out NOW. Also I heard it was better for tax purposes.
 

HummerTuesdays

Another girrrrl!!!
Apr 24, 2005
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#25
It helps now because you'll have that much more equity in the co-op when you sell it. Think of it this way...instead of the money sitting in savings & earning 4% (?) interest, it's sitting in equity in the co-op & saving you 6% on that principle.