Home refinance advice

[Felix]

3d wrote:
What bank handles your mortgage?

A local bank. They only operate in three states.

[3d]

Felix wrote:
[quote=3d]
What bank handles your mortgage?

A local bank. They only operate in three states.
Interesting. I've never heard of a mortgage lender allowing you to apply extra payments to the front end of the loan. It's always the back end.

[dotman]

btw, this is the article that got me thinking about all this. it's not highly technical, just peaked my interest.

http://money.cnn.com/2011/03/14/real_est.../index.htm

.dot

[mattkime]

clay wrote:
[quote=mattkime]
>>It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

so you're saying that the extra payments don't decrease the interest you'll be paying?

that's usually the default way extra payments get applied. With my previous lender, I could make extra PRINCIPAL payments simply by filling in the amount in the "extra principal" field of my payment stub. With my current lender, I can still make extra principal payments in much the same way.

It's definitely something you want to be sure is getting applied in the correct way (to principal, not interest).
thanks!

seems like the standard "bank defaults to what is worst for the customer"

[Fritz]

if the timing isn't important, the rates may roll back .25% for a 15 if the Dow rolls over.
I'm waiting a bit, coz I think it will.
If you're a union member, some banks will give you a discount on closing costs (JPM Chase).
Citi is running a rate guarantee in some areas for 3 yrs at no charge,
The rates (at least here in NY) are pretty close. It's the closing that varies a lot.
Mortgage rec'd fees vary widely state to state. In NY it's criminally high; and the banks charge as much for a transfer fee, so there's usually no gain either way in NYS.
Your credit score means everything to the bank in the rate and whether or not they'll even refi you.
Just remember the people responsible for bringing down the house in '08.
Them and the short sighted ConRegress of the last 20 years.

[davester]

3d wrote:
[quote=Felix]
[quote=3d]
What bank handles your mortgage?

A local bank. They only operate in three states.
Interesting. I've never heard of a mortgage lender allowing you to apply extra payments to the front end of the loan. It's always the back end.
It can't be done. Felix isn't correct. Mortgages don't work that way. Actually, there is a tiny benefit to making extra payments in that the proportion of interest to principal goes down a tiny bit for every extra payment. Hardly enough to make a difference though and you also lose a little bit of a tax deduction with that reduced interest.

[Mac1337]

Enough speculation....

$250K at 5% for 30 years....$1342/mo.

make extra $500 month($1842 total) and you are done in 2027, done in 16 years.

same principle for 15 years---$1976/mo.

[mattkime]

>>It can't be done. Felix isn't correct. Mortgages don't work that way. Actually, there is a tiny benefit to making extra payments in that the proportion of interest to principal goes down a tiny bit for every extra payment. Hardly enough to make a difference though and you also lose a little bit of a tax deduction with that reduced interest.

Then how do you pay it off early without paying the full 30 years of interest?

[3d]

Dakota wrote:
Enough speculation....

$250K at 5% for 30 years....$1342/mo.

make extra $500 month($1842 total) and you are done in 2027, done in 16 years.

same principle for 15 years---$1976/mo.

Correct. If you are making substantial extra principle payments aggressively (like every single month) it pays off to make those extra payments. It's a waste to just randomly pick away at the principle here and there. Save your money unless you are doing it aggressively.

But then... if you are making aggressive $500 extra principle payments every single month for 15 years then you should've gone with a 15 year mortgage in the first place. There's a point in which being overly cautious and safe will cost you a bundle.


***Edit***

Oh.. and i forgot to add. This ONLY applies to someone who is planning on staying at this house for the entire 30 years. If you have ANY doubts, and might sell the house and move sometime in the next 25-30 years then stop making those extra principle payments immediately. Remember, those extra principle payments are applied to the back end of the loan. Years 30, 29, 28, 27 etc... if you sell the house in 20 years and move. All those extra payments are moot.

[davester]

mattkime wrote:
>>It can't be done. Felix isn't correct. Mortgages don't work that way. Actually, there is a tiny benefit to making extra payments in that the proportion of interest to principal goes down a tiny bit for every extra payment. Hardly enough to make a difference though and you also lose a little bit of a tax deduction with that reduced interest.

Then how do you pay it off early without paying the full 30 years of interest?

Hey, guess what, I'm wrong, and so is 3d. Sorry Felix, I misread your statement. When you make an extra principal payment it is the same thing as paying your next payment ahead of time since the principal on the loan is reduced. This means that you remove that next payment and bump the entire amortization schedule one month closer.