Question about mortgage payments...

[CTrain]

The payment table look like this:

Monthly Principal Interest

1) $547 $132 $415
2) $547 $133 $414

So lets say when I make my first payment of $547 and I inlcude another payment toward the principal
....lets say $5000.

Would that change what my second payment would be like as in principal and interest ??
I know I'll still be paying $547 but instead of $133 of principal and $414 interest.....would my principal be more and the interest be less ??

I have a 5/1 ARM BTW.
I'd like to pay it down as much as possible or else it gonna jump big time after 5 yrs.

 

[Vic]

Interest rate and original loan amount required please. PM if that would make you feel more comfortable.

 

[laurenlex]

Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

 

[Sluggo]

Originally posted by: Vic
Interest rate and original loan amount required please. PM if that would make you feel more comfortable.

Yep, if anyone here knows the Mortgage game its Vic.

 

[AccruedExpenditure]

George Bush hates mortgage payments...

 

[FP]

Typically no. A prepayment is just a credit. Meaning, you wouldn't have to pay your mortgage for x # of months.

If you want to apply the extra payment to the principal, you have to do so in writing (at least in Cali) and yes the % applied to principal each month would increase but your payment would remain the same. You would just be "shortening" the amount of time until your loan is paid off, (ie taking it off of the backend of the loan).

 

[CTrain]

Sure its a 4.75% ARM 5/1 from Penfed.
The amount is for $105K. Those bastard made me put 25% down.

My monthly is $547 until after 5 yrs.
Just based on their projection, the payments will be $656 after 5 yrs.

Is it worth it for me to pay it down ??
Its only 4.75% but it seems like all the interests are front loaded(of course they are all like this)

 

[CTrain]

Originally posted by: binister
Typically no. A prepayment is just a credit. Meaning, you wouldn't have to pay your mortgage for x # of months.

If you want to apply the extra payment to the principal, you have to do so in writing (at least in Cali) and yes the % applied to principal each month would increase but your payment would remain the same. You would just be "shortening" the amount of time until your loan is paid off, (ie taking it off of the backend of the loan).

Thats what I was wondering...I know my payments will always remain the same.

 

[flot]

Your payments are fixed - paying it off early will simply reduce the total # of payments...

 

[FP]

Is it worth it for you to pay it down? That depends on what type of investor you are and how comfortable you are with risk.

If you only paid the interest on the loan and invested the amount you would have paid towards principal in something you could actually be in a better situation in the long run.

In my opinion, paying principal in the first 7 years is pointless because the interest is "front loaded" like you said. My money does nothing for me when it is sitting in equity in my house. All it does is make the bank happy and allows them to sleep better at night.

Of course there is always a flip side but that is why they call it risk.

 

[Vic]

Originally posted by: binister
Typically no. A prepayment is just a credit. Meaning, you wouldn't have to pay your mortgage for x # of months.

If you want to apply the extra payment to the principal, you have to do so in writing (at least in Cali) and yes the % of principal paid would increase but your payment would remain the same. You would just be "shortening" the amount of time until your loan is payoff, (ie taking it off of the backend of the loan).

To your first part, true, which is why I always recommend to my clients to specifically note to the lender that the prepayment is to be applied directly to the principal. Otherwise, the lender may just think you're trying to make several months payment in advance. This varies lender by lender though, which is why you always want to make your communication with them very clear.

To the 2nd part, he's not asking if his payment will go down (he specifically said that he knew his payment wouldn't change), he's asking if the amount of each monthly payment that goes to principal would increase after he makes a prepayment. The answer to that is yes.
The final question there is, how much? That's why I need his interest rate and original loan amount.

 

[jadinolf]

Originally posted by: AccruedExpenditure
George Bush hates mortgage payments...

So do I.

 

[Vic]

Originally posted by: CTrain
Sure its a 4.75% ARM 5/1 from Penfed.
The amount is for $105K. Those bastard made me put 25% down.

My monthly is $547 until after 5 yrs.
Just based on their projection, the payments will be $656 after 5 yrs.

Is it worth it for me to pay it down ??
Its only 4.75% but it seems like all the interests are front loaded(of course they are all like this)

Hmm... you JUST bought it? Like 3 months ago? Great rate BTW.

Anyway, after the $5k prepay, your very next payment will be $394.79 interest and $152.94 principal (total pay of $547.73, lucky dog). Final payoff will move up to 326th month.

Interest is not really front-loaded. That's more of a misconception. You pay more initially because there is more principal to charge interest on. Make sense?

 

[z0mb13]

make sure u dont have a prepay penalty!

 

[Vic]

Originally posted by: z0mb13
make sure u dont have a prepay penalty!

All prepayment clauses allow the prepayment of up to 20% of the original principal balance within a 12 month period without incurring a penalty. In his case, 20% = $21k.

 

[z0mb13]

Originally posted by: Vic

Originally posted by: z0mb13
make sure u dont have a prepay penalty!

All prepayment clauses allow the prepayment of up to 20% of the original principal balance within a 12 month period without incurring a penalty. In his case, 20% = $21k.

depends on the contract.. I know my company has 2 year prepay penalties

he might be interested in putting more money thus invoking the pp clause

by the way vic what do u do?

 

[CTrain]

Originally posted by: laurenlex
Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

Thanx for the suggestion, the results are enlighten.

With the example I posted....if I include an extra $5000 payment at the beginning.

After 5 yrs, my remaining balance will be $96,073 with no extra mayment.
After 5 yrs, my remaining balance will be $89,760 with a $5000 extra payment.
Thats only a saving of $6313 TOTAL.($1313 if you minus the $5000)
Its a little disappointing cause I thought it would be reduced more than that.

Instead if I just put the $5000 in a 5yr CD @5%, I would have $6420.
- I get more money.
- The money is liquid instead of being tied to the house
- I get to deduct more from my gross income.


Logically, I should have just looked at my mortgage rate at 4.75% and the CD rates at more than 5% and think I would get more money in CDs.
But some some weird reason, I keep thinking differently.

Thanx for all the inputs.

 

[z0mb13]

Originally posted by: CTrain

Originally posted by: laurenlex
Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

Thanx for the suggestion, the results are enlighten.

With the example I posted....if I include an extra $5000 payment at the beginning.

After 5 yrs, my remaining balance will be $96,073 with no extra mayment.
After 5 yrs, my remaining balance will be $89,760 with a $5000 extra payment.
Thats only a saving of $6313 TOTAL.($1313 if you minus the $5000)
Its a little disappointing cause I thought it would be reduced more than that.

Instead if I just put the $5000 in a 5yr CD @5%, I would have $6420.
- I get more money.
- The money is liquid instead of being tied to the house
- I get to deduct more from my gross income.


Logically, I should have just looked at my mortgage rate at 4.75% and the CD rates at more than 5% and think I would get more money in CDs.
But some some weird reason, I keep thinking differently.

Thanx for all the inputs.

make sure u know the diff between APY and APR...

CD rates are APY.. mortgage rates are APR

 

Originally posted by: CTrain

Originally posted by: laurenlex
Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

Thanx for the suggestion, the results are enlighten.

With the example I posted....if I include an extra $5000 payment at the beginning.

After 5 yrs, my remaining balance will be $96,073 with no extra mayment.
After 5 yrs, my remaining balance will be $89,760 with a $5000 extra payment.
Thats only a saving of $6313 TOTAL.($1313 if you minus the $5000)
Its a little disappointing cause I thought it would be reduced more than that.

Instead if I just put the $5000 in a 5yr CD @5%, I would have $6420.
- I get more money.
- The money is liquid instead of being tied to the house
- I get to deduct more from my gross income.


Logically, I should have just looked at my mortgage rate at 4.75% and the CD rates at more than 5% and think I would get more money in CDs.
But some some weird reason, I keep thinking differently.

Thanx for all the inputs.

Yup, everyone who jumped on these ARMs are going to be kicking themselves in the ass in a few years.

 

[z0mb13]

Originally posted by: SampSon

Originally posted by: CTrain

Originally posted by: laurenlex
Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

Thanx for the suggestion, the results are enlighten.

With the example I posted....if I include an extra $5000 payment at the beginning.

After 5 yrs, my remaining balance will be $96,073 with no extra mayment.
After 5 yrs, my remaining balance will be $89,760 with a $5000 extra payment.
Thats only a saving of $6313 TOTAL.($1313 if you minus the $5000)
Its a little disappointing cause I thought it would be reduced more than that.

Instead if I just put the $5000 in a 5yr CD @5%, I would have $6420.
- I get more money.
- The money is liquid instead of being tied to the house
- I get to deduct more from my gross income.


Logically, I should have just looked at my mortgage rate at 4.75% and the CD rates at more than 5% and think I would get more money in CDs.
But some some weird reason, I keep thinking differently.

Thanx for all the inputs.

Yup, everyone who jumped on these ARMs are going to be kicking themselves in the ass in a few years.

ARMs are quite ok, option arms are the killers!

 

[LordSnailz]

Originally posted by: SampSon

Originally posted by: CTrain

Originally posted by: laurenlex
Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

Thanx for the suggestion, the results are enlighten.

With the example I posted....if I include an extra $5000 payment at the beginning.

After 5 yrs, my remaining balance will be $96,073 with no extra mayment.
After 5 yrs, my remaining balance will be $89,760 with a $5000 extra payment.
Thats only a saving of $6313 TOTAL.($1313 if you minus the $5000)
Its a little disappointing cause I thought it would be reduced more than that.

Instead if I just put the $5000 in a 5yr CD @5%, I would have $6420.
- I get more money.
- The money is liquid instead of being tied to the house
- I get to deduct more from my gross income.


Logically, I should have just looked at my mortgage rate at 4.75% and the CD rates at more than 5% and think I would get more money in CDs.
But some some weird reason, I keep thinking differently.

Thanx for all the inputs.

Yup, everyone who jumped on these ARMs are going to be kicking themselves in the ass in a few years.

Hey if you have the links you used, post em, I would be interested too.

 

[CTrain]

Originally posted by: Vic

Originally posted by: CTrain
Sure its a 4.75% ARM 5/1 from Penfed.
The amount is for $105K. Those bastard made me put 25% down.

My monthly is $547 until after 5 yrs.
Just based on their projection, the payments will be $656 after 5 yrs.

Is it worth it for me to pay it down ??
Its only 4.75% but it seems like all the interests are front loaded(of course they are all like this)

Hmm... you JUST bought it? Like 3 months ago? Great rate BTW.

Anyway, after the $5k prepay, your very next payment will be $394.79 interest and $152.94 principal (total pay of $547.73, lucky dog). Final payoff will move up to 326th month.

Interest is not really front-loaded. That's more of a misconception. You pay more initially because there is more principal to charge interest on. Make sense?

Make perfect sense.
It did seem like it was front loaded.
I locked in the rate in July and closed in early Sept.
I could have gotten 4.5% had I acted 2 weeks earlier.

I just ran some numbers at bankrate and found my answers.
Thanx.

 

[Vic]

Originally posted by: z0mb13

Originally posted by: Vic

Originally posted by: z0mb13
make sure u dont have a prepay penalty!

All prepayment clauses allow the prepayment of up to 20% of the original principal balance within a 12 month period without incurring a penalty. In his case, 20% = $21k.

depends on the contract.. I know my company has 2 year prepay penalties

he might be interested in putting more money thus invoking the pp clause

by the way vic what do u do?

Currently a manager at a largish regional retail mortgage lender. One of those all-in-one types. We do everything. Conforming, governments, Alt, non-prime, purchase, refinance, you name it as long as it's residential. I have 11 years experience in mortgage, most as a loan officer.

The 2 year PPP's your company offers just means that your borrowers can't prepay more than 20% of the original in the first 2 years. They can still make small prepayments (as long as the total of any 12 month period in that first 2 years is less than that 20%). Most PPP's are designed just so the customer doesn't pay it off in full (i.e. by refinancing) with an initial period of time.

To the OP, here's your amortization table Text

 

[CTrain]

Originally posted by: LordSnailz

Originally posted by: SampSon

Originally posted by: CTrain

Originally posted by: laurenlex
Just google "mortgage amoritazation schedule" (let google spell amoritatiztioaitoaioan for you). Plug in your numbers. They have lots of cool charts and shlt.

Thanx for the suggestion, the results are enlighten.

With the example I posted....if I include an extra $5000 payment at the beginning.

After 5 yrs, my remaining balance will be $96,073 with no extra mayment.
After 5 yrs, my remaining balance will be $89,760 with a $5000 extra payment.
Thats only a saving of $6313 TOTAL.($1313 if you minus the $5000)
Its a little disappointing cause I thought it would be reduced more than that.

Instead if I just put the $5000 in a 5yr CD @5%, I would have $6420.
- I get more money.
- The money is liquid instead of being tied to the house
- I get to deduct more from my gross income.


Logically, I should have just looked at my mortgage rate at 4.75% and the CD rates at more than 5% and think I would get more money in CDs.
But some some weird reason, I keep thinking differently.

Thanx for all the inputs.

Yup, everyone who jumped on these ARMs are going to be kicking themselves in the ass in a few years.

Hey if you have the links you used, post em, I would be interested too.

Go to BANKRATE.com
They have all kind of calculators you can use.

 

ARMs are quite ok, option arms are the killers!

Depends. When their rates double 5 years from now and they want to refinance, they are going to lock in a rates more than double what they could have to begin with.
All depends on the reason behind your loan.