Mortgages - Crunch Your Numbers

chickflick · #1 07/13/04, 07:03 PM

Hi everyone! Since so many are talking about buying land, homes, etc. I just wanted to pass along this wonderful TOOL. The word is "Amortization". I remember the first time I actually SAW the difference interest makes on how LONG and HOW MUCH you actually pay for something! I belive this little page link is only to make comparisons for a year or so... BUT if you can find a way to calculate loans with an AMORTIZATION SCHEDULE for the entire lenth of the note... and then make changes to years paid/and or/interest... it is possible to save a LOT and knock YEARS off your payments.

Basically, this one just shows your how much you ACTUALLY pay w/the figures you put in it! Have fun.....
http://www.bankrate.com/brm/popcalc2.asp

Old Jack · #2 07/13/04, 07:33 PM

Quote:

Originally Posted by chickflick

Hi everyone! Since so many are talking about buying land, homes, etc. I just wanted to pass along this wonderful TOOL. The word is "Amortization". I remember the first time I actually SAW the difference interest makes on how LONG and HOW MUCH you actually pay for something! I belive this little page link is only to make comparisons for a year or so... BUT if you can find a way to calculate loans with an AMORTIZATION SCHEDULE for the entire lenth of the note... and then make changes to years paid/and or/interest... it is possible to save a LOT and knock YEARS off your payments.

Basically, this one just shows your how much you ACTUALLY pay w/the figures you put in it! Have fun.....
http://www.bankrate.com/brm/popcalc2.asp

What's a mortgage? :haha:

cashcrop · #3 07/13/04, 07:57 PM

Do a google search for: mortgage professor. You can findout how much sooner you could pay off a mortgage w/ extra payments, what different interest rates will cost and how much cheaper it is for a mortgage if you choose shorter than the normal 15/30yr mortgage.

Taylor · #4 07/13/04, 08:56 PM

No kidding. One of my pet peeves (I love anything that doesn't need fed) is that Mr. and Mrs. America have been sold a bill of goods to the effect of,
"We can arrange for you a nice low payment on your 30 year mortgage, so you CAN afford that McMansion after all." How nice of the bank to forget to mention that they are helping you PAY MORE so you can PAY LONGER. GRRRR. :no: So shop around and don't fall for the long mortgage. We paid ours off in 10 years, sold that place and paid for this one, and it is a wonderful feeling to not have house payments. Of course, we never buy the high-priced houses, more of fixer-uppers with charm and a good barn, but that is what suits us. I preach the buyer beware message to my students, hopefully they will check out the total amount a house/car/etc. actually costs them by looking carefully at the charts and deciding to pay extra each month on the principal to pay down in the shortest time possible. End of rant, thanks for posting this important information.

ohio_kid · #5 07/13/04, 10:19 PM

My 20 year old son is buying 11.79 acres for $20,000. His payment will be about $160 a month for the next 15 years. I told him that it is hardly a mortgage,it's more like a cheap extended car loan. Not really sure why I brought it up but I thought it was cool that a 20 year old was buying property. I ain't sayin what I was doin when I was 20.

Alice In TX/MO · #6 07/14/04, 06:24 AM

Ohio Kid...if he would pay $200 a month on that, he would pay it off early, and actually pay LESS for the land in the long run.

ohio_kid · #7 07/14/04, 07:25 AM

That's exactly what he intends to do. That's even the amount he said he was going to pay,$200. From what I understand, any money that is paid over and above the monthly payment is put on the principle. We have been renting part of the property for about four years and on the other part of the property is a block house that my son will live in. He informed me that we won't have to pay lot rent anymore. What a nice land-lord. I told him that I would kick in on the taxes and insurance, though. He won't hear of it.

mightybooboo · #8 07/14/04, 08:18 AM

Quote:

Originally Posted by chickflick

Hi everyone! Since so many are talking about buying land, homes, etc. I just wanted to pass along this wonderful TOOL. The word is "Amortization". I remember the first time I actually SAW the difference interest makes on how LONG and HOW MUCH you actually pay for something! I belive this little page link is only to make comparisons for a year or so... BUT if you can find a way to calculate loans with an AMORTIZATION SCHEDULE for the entire lenth of the note... and then make changes to years paid/and or/interest... it is possible to save a LOT and knock YEARS off your payments.

Basically, this one just shows your how much you ACTUALLY pay w/the figures you put in it! Have fun.....
http://www.bankrate.com/brm/popcalc2.asp

OK,heres what youve got and what I did.Loan for 60000 at 7.5% over 30 years.Monthly payout 419.00.When loan starts out 43 dollars goes to principle,rest is interest.By paying an extra payment when you start out,that extra 419 dollars will knock out the principle on 9 payments and return you an interest savings of 3900.00 approximately(because thats 9 payments you wont have to make)!!!The next payment you make will actually now be payment number 10(approx.) on the amortization table,with a greater principle payout and less monthly interest. Thats quite a return for 419 bucks.The more time left on the loan,the higher the ratio of interest to principle,so the return is greater early on.I would look at my table,find 6-10 next principles payments,add them up and include it with my monthly payment,think it took me 9 years total to pay off,because sometimes I couldnt pay extra.I know of no investment with a guaranteed return better than this.
BooBoo

Guest Too · #9 07/14/04, 08:28 AM

Ohio Kid,
Make sure he lets the mortgage company know all extra money goes to principle. I have had places apply extra money I sent them to the next payment. Then you end up prepaying several payments. It gives them more money unless you specifically tell them to put all extra money on the principle. Some financial people suggest writing a seperate check to make sure. /shrug Just watch em close to make sure they are doing it right. :yeeha:

#10 07/14/04, 09:39 AM

Here's another handy mortgage tip. When you get your loan, set it up for monthly payments but actually make them in installments every 2 weeks. You are paying the exact same amount of money per month, it's just cut up into 2 checks. The only extra cost to you is the postage.

Do the math on one of those online mortgage calculators and you will find that this knocks about 4 years off of a 30 year loan. Saves you lots and lots of money. The key is putting together a monthly budget that doesn't depend on sending out your full mortgage payment right after you get paid. You should try to have a buffer of cash equal to the value of one of the 2 week payments.

Mortgage companies offer loans that are specifically set up for biweekly payments. But don't do it, because then you *must* send a check every 2 weeks. By taking the monthly payment plan you are keeping some flexibility for those times when you really need to wait an extra week to send payment. There will be no difference in rate. There is usually no penalty for early payments.

-Jack_Cville

ohio_kid · #11 07/14/04, 12:52 PM

Quote:

Originally Posted by Guest Too

Ohio Kid,
Make sure he lets the mortgage company know all extra money goes to principle. I have had places apply extra money I sent them to the next payment. Then you end up prepaying several payments. It gives them more money unless you specifically tell them to put all extra money on the principle. Some financial people suggest writing a seperate check to make sure. /shrug Just watch em close to make sure they are doing it right. :yeeha:

Thanks, GT. We didn't think of that. Good idea.

mistletoad · #12 07/14/04, 01:17 PM

I checked with our mortgage company about paying our monthly payment in two bi-weekly installments and they told me I would not save any money at all because they would hold the first installment until the full payment is received. They also told me if I sent my extra principal payment as a separate check, that would be held until a full payment was received. So I stick with adding extra principal to each payment we make - we pay online and there is a line on the voucher for "extra principal" so it is always credited properly. Bottom line, check with your mortgage company as they all do things differently.

Terry - NW Ohio · #13 07/14/04, 04:20 PM

[QUOTE=mistletoad]I checked with our mortgage company about paying our monthly payment in two bi-weekly installments and they told me I would not save any money at all because they would hold the first installment until the full payment is received. They also told me if I sent my extra principal payment as a separate check, that would be held until a full payment was received. QUOTE]

Is this legal for them to do?!!!

#14 07/15/04, 01:23 PM

[QUOTE=Terry - NW Ohio]

Quote:

Originally Posted by mistletoad

I checked with our mortgage company about paying our monthly payment in two bi-weekly installments and they told me I would not save any money at all because they would hold the first installment until the full payment is received. They also told me if I sent my extra principal payment as a separate check, that would be held until a full payment was received. QUOTE]

Is this legal for them to do?!!!

Probably not.

The loan documents (99% of the time) state explicitly that there is no penalty for early payment. If the bank holds on to your early payment until more money is received (thus letting more interest rack up) then they are in violation of the contract, for they have clearly penalized you for early payment. There would certainly be civil penalties for this. I don't know enough about banking law (Federal or state) to say whether it is criminal conduct as well.

In my work (insurance broker) I have to deal with mortgage companies on a regular basis. I see them doing stupid/illegal things regularly. Some are worse than others. More often than not is is some poorly trained CSR's ignorance that causes them to do stuff like that rather than deliberate intent to break the law. But they will do things like hold onto homeowners insurance premiums until the policy is about to cancel for non-payment in order to reap more interest. When you are holding premiums for millions of homes, that adds up to a lot of money every year. Very risky, though. Or they will try to order changes to the client's policy when they have no legal authority to do so.

There are a lot of little areas like that where the bank will cleverly hold onto money or recategorize it in some way to subtly screw you over. With checking accounts, they will clear a check for $90 and bounce 2 others for $30 each when you have $100 in your account and all 3 come in at once. Why? To collect the $20 bounce fee twice instead of once. This is actually illegal now, but some banks still do it.

Bottom line is that you have always got to keep a close eye on what your mortgage company is up to - especially if it's one of the bigger lenders that does everything in a cookie-cutter way and there is nobody there who really cares about getting things right.

-Jack_Cville

pcdreams · #15 07/15/04, 01:56 PM

my real estate agent told me if I make 1 extra payment a year I would pay off our 30 yr mortage in +/- 17 yrs.

I didn't believe it but I checked and thats about right. Haven't been able to do so however.

mistletoad · #16 07/15/04, 04:43 PM

Quote:

Is this legal for them to do?!!!

Yup. Of course what unregistered said would be true if we were talking about an early payment rather than a partial payment. They can, and in this case, will, hold a partial payment until the rest of the payment is received.

Mutti · #17 07/16/04, 03:22 AM

Just ask your bank for an amortization form...ours lists every payment for the full 15 years. We pay an extra $50 a month religiously and this is going to cut our years to pay substantially. DEE

chickflick · #18 07/16/04, 01:11 PM

There seems to be a little misunderstanding.. THE POINT of paying every two weeks, IS that once a year, you'll have enough money to make ONE EXTRA MONTHLY payment. (Particularly, since most workers get paid bi-weekly rather than monthly)

THAT will then knock down the mortgage a little faster when it is put on Principal. Just keep track of it yourself.. pay monthly as usual, THEN when you have that extra payment saved up, send it in as a Payment to PRINCIPAL.

Paying on the Principal is the key. It brings down your balance SOONER, i.e. faster, thereby eliminating the REAL cost of your DEBT.. the INTEREST!!!

It seems funny.. My little OLD computer running Windows 3.1 would do an amortization for a full 30 yrs that you could print out. Since Windows 98 (and nowhere online) do I see this 'option'. Most of them now only look at the first year, etc. IF you can LOOK and see the FULL 30 yr (or "x" years) of what your paying.. you'll be really ****ED!!! (All hail the mighty banks :worship: NOT!)

Anyone find a site or free program to do this online? The one I posted only shows PART of the story (one year, I think. (pft.. crappy banks.. interest... credit cards.. all designed from day one to Steal our Wealth!!!) Grrrrrr.

pcdreams · #19 07/16/04, 03:46 PM

if you have excell (or just about any spreadsheet program) it has a templet to do an amortarization schedule. you just need to put in what you currently owe(or will if you haven't taken out the loan), length of loan and interest % and it will calculate it for you, as well as what any extra payments would do..

lyteora · #20 07/18/04, 07:47 AM

Something else to watch for is when taxes and insurance is figured in to your loan, for us that made it easier than trying to come up with big$ several times a year BUT added about $200 a month to our loan. A lot more than we figured, especially since they wanted us to have flood insurance something that we have not had (we have been here 5 yrs this was a refinance after adding on to the house) and don't need (if you saw where the house sits you would understand, but our insurace man...that SELLS insurance came out and took pictures..while we were in the middle of tearing part of the house down,and sent them to FEMA who decided based on those pictues and the fact that the county considers us flood zone A, that we are in a high risk group? Why not an independent party that wont be making money off this? I really think that a reassesment of zones needs to be done, my parents live next to a creek that is much bigger than our intermitent drop in the bucket, and it did go out of its banks during Hurricane Chamile but ours has never in at least 85 years that our neigbor has lived here ever gotten out of its banks, but we are both flood zone A) and flood insurance cost us over $743 a year! Sorry for the long rant just realized I went off the deep end. LOL