Mortgage Prepayments

[Ban Hammer 13,408]

Disposable income = monthly income after paying the bills

yes i know. you posted: "If prepaying reduces your disposable income, then don't do it. Otherwise, do it."

isn't prepaying extra reducing their disposable income anyways?

[I AM NOT THAT GUY 5,715]

The correct answer was already given. Pay off your highest interest debt first. Carrying a balance on credit cards, while prepaying your mortgage would be foolish. However, in my case, the 7% rate I have on my mortgage is my highest interest debt, so that is where I am putting the extra funds. Less than two years left on a 15 year mortgage.

[GaryC 7]

We just refinanced our mortgage at 4.5% We are going with an automatic withdrawal from our checking account ever two weeks so we are making half the payment every payday. This by itself is going to reduce our total payments by 6 to 7 years. Doing this will make an extra payment a year without any pain at all. It also reduces our interest because we are making half of our payment early each month. We also have the option with just a phone call of adding extra money to any payment. Anything you pay above the normal payment goes straight to principal. If your mortgage company doesn't have a bi-weekly plan like ours there are companies that will collect your payment every payday and arrange things for you. If your interested I can PM you the name and phone number of the company we go through. So far it has worked well for us.

[jade_arb 3]

Really a crazy system giving you 30 years to pay off your home when the damn thing won't even last that long. First thing to go are major appliances like your HVAC system, hot water heater, dishwasher, refrigerator. Then your argon windows will fog up, that is a major expense, plus your roof will need replacing, and if you have plastic siding, UV rays wreck that to hell. Any little water leaks cause major structural damage to that glued together saw dust they use. Plastic plumbing fixtures start cracking as age makes them far more brittle. Now I see they are using cheap garden plastic hose for once copper pipes. Hate electricians that use those plug holes that barely make contact when they have two big screws to use. Concrete blocks have no business being used for basement walls unless you live in the desert, they crack and let water leak in.

Son's furnance motor alreay went out with this made in China #######, after 13 months, his dad used powerful arguments to get him a new motor free, but installed it himself, b@stards aren't even varnishing the stator windings anymore leading to vibrations of that magnet wire wearing out the thin insulation causing a major short circuit.

Also depend on the design of the house lacking any access to common plumbing problems, you have to start by ripping out a wall then replacing that just to repair a minor leak. Flooring and carpeting can be a major expense to replace, real oak floors can be sanded and refinished many times, today to get a very thin veneer, less than a 1/32" where a deep sratch leaves you with no option but to replace the entire floor. Most new homes only come with a one year warranty, then all these expenses are left to the owner. Yet another hazard is in road salt areas where that ####### can crack your nice driveway and sidewalks.

You have all this on top of your high interest payments, no wonder why people are going broke, they do not make homes like they use to.

I found it much better to buy and pay off the land, have some cash, like a common down payment, take a year off and build my own home, did get a construction loan and paid that off in a couple of years, and did everything right. But did get screwed on these argon filled windows, but slowly changing that and doing the work myself. You be suprised the money and the real estate agent makes in selling a home, and labor is totally outrageous paying over 75 bucks an hour for some idiot scratching his head. And did design my home so I do have access for common repairs so I don't have to tear out a wall. Also saved on YMCA fees, got plenty of exercise in the process.

Did get a break on property taxes by arguing with the assessor on what I actually had in the home, but that only lasted a couple of years. They got smart and use every trick in the book to legally rob you.

Owning your own home, the American dream that has become a nightmare.

Oh, when I designed my home, already knew a wire,a pipe, or a heating duct had to go through a joist or a stud, was far easier to do that on a a drill press or a saw then have to stand on your head and do that after it was nailed in and have to use a hand tool because a power tool won't fit. Also did all my trim on saw horses doing all four side for far superior wood protection. Played with the dimensions a bit to use standard size lumber to reduce waste, see some homes with the same amount of waste as they use in the home. Really shake my head when I see contractors at work, do everything the long hard way with lots of waste. And you are paying triple for that!

Our nightmare began before we actually owned the house. The seller was pretty much an a**hole.

When we started looking for a house. My husband and I have a lot of arguements because I wanted to buy a cheap house that need repairs and fix it up, probably expending the same money that we were going to with a "ready to move in" house. But I was going to have the satisfaction that I design the interior of the house. He wanted a move-in condion for a higher price. After 2 months of looking for houses. We ended up buying a house that apparently was in ready to move-in condition. I did not like the interior of the house but it had the 4 main things I was looking for: Pier and Beam fundation, Hardwood floors, Gas(we had all electricy appliances in our old apartment and energy bill was always around $300-$450 for a 795sp ft!! #######!!!) ,and it was close to Brent's workplace. The house had new roof and new HVAC, or that is what the previous owner said and inspector told us they were in pretty good condition. So the house only needed minor repairs, or that what we tought so.

The seller agreed to include all the appliances when we made the offer for the house. Then apparently he got higher offer after he took ours. When we asked him for closing cost money for repairs that the inspector said we needed to do, he said NO. After a few days of our realtor trying to get some money from him, the seller waited until the last day of the option period to call us and tell us that he was willing to negotiate the closing cost, so we met and he came up the idea of changing the sale price and add $ 10,000 and give us $3,000 in closing cost, $2,000 in Home Depot or Lowes Gift Cards and of course he wanted to keep the other $ 5,000.... I was like "is he high or something?". Since we obviously said NO, to his brilliant idea. He came up with his second idea "We will keep the price as I agreed but I want all my appliances back", We said NO, you agreed to give us all the appliances its and the contract. We had to buy the house without getting any money from him. Since we couldnt get rid of us, nor get more money from us he was bitter about it, because the other offer was for the listing price.

We were nice enough to give him a couple of days after the closing day to move out(something I regret). In the closing day, he said he only had his motorcycle and a few things but that he has going to be out next day morning( a Wednesday). On wednesday afternoon I drove by the property and I call him to know if he had already left the property as the said he was going to, or to see if I could get inside of the house to get some measuresments of doors, living room since it had carpet and I'm allergy to carpet. Changing the carpet was one my high priorities. He told me that he still had a lot of stuff insided and I needed to wait until the lease agreement was over, meaning Thursday night; because he was not going to be able to do it on wedsday night. Next day I went to the property around 8 am to cut some branches that were hanging over the roof and start preparing the outside of the house to paint it. The seller came like around 9am and he was not happy to see me there. 30 Minutes later I found out why, the only stuff he had was 2 plastic pot plants, a doll, and the door mat!! He bitterly gave the last key he had and told me "Congratulations, have fun remodeling your house". I was dying to tell him "Dude, just get the #### out of my property" but my parents taught better, so I just smile and I said "Thank you, BYE"

Once we had access to the empty house, I found out a lot things were just bad. The frigde stop working like hour later after he left, Oven did not work, it looks like if somebody cut the temperature thermostat, the dishwasher does not work properly, we asked our realtor if we could do anything about the appliances since the inspector said they were working fine. He told us that we need a lawyer..... I wonder if the 30 minutes he was inside the house were to make sure the frigde, oven, dishwasher did not work.

Electricy is a mess... not a single cable in the house is grounded... The insulation was too low... I had to open all the windows because the AC thermostat did not work as well, that was when I found out that windows appear to be in ok conditon, but I broke one glass when I was trying to kill a fly with my hand... the glasses are thin and loose.

After a month, we still haven't moved in completely and so far we have spent around $ 20,000 fixing up the "ready to move-in "house, and there are still a lot of things that we need to be done. Thankfully my parents have been kind enough to lend us money for all the repairs, with the agreement of paying them back when we sell the house. My husband told me a few days ago, your idea of buying a fixer upper was not that bad after all.

[JVKn'CVO 11]

We bought a house a month ago, as a first time homebuyers there are a lot things we are clueless about. We need to make the first mortgage payment pretty soon. I would like to get your opinion the prepayment option.

My husband and I have discussed the prepayment option to reduce our 30 year mortgage. He is not really into the idea and trying my best to convince him to pay 2 to 3 times the principal amount whenever we can to save money in interests and to reduce it to 15 or less years.

I really dislike the idea of paying as much as 3 times the original amount. I mean more than half of the payment is just interest! I guess I cant really complaint about the interest since we got a 5% rate, but even with such a low rate intest is a lot.

What would be the best option, Prepay the mortgage, put the money in a savings account and have it in case of an emergency, or invest it?

I just did a school project on this...prepay makes a ton of difference, if you can do it, go for it!!!

If you want to see the numbers for yourself and are proficient with Excel, there is a formula for loans pv, pmt and related (just use the word "loan" on the function search option). Play around with the numbers and you will be surprised at what a difference it makes

Saludos,

Caro

[NickD 203]

Read the fine print on your mortgage and know your state laws, if you are even a couple of days late on a payment, your mortgage company can start foreclosure proceedings. But is you are paid a couple of years in advance, they cannot touch you.

Another means of foreclosure is your property taxes, really don't know why we put up with that and do not storm our government, even with your home paid off a constant threat with no reasons like health, loss of income, severe losses in your 401K plan as not valid reasons to keep from paying these taxes or even reducing them. Their constant waste of our hard earned money comes first. Before thinking of buying anything, a car, TV set, or a new refrigerator, that money for taxes has to be in the bank first. Even for a home that is only large enough or even overcrowded for your family. Renters are not exempt from that either, not only have to pay for the principle and the landlords interest, but those damned taxes as well plus some profit for the landlord.

[jade_arb 3]

As the mortgage is a first time buyers loan, you might want to first check and make sure there are no pre-payment penalties.

I asked severals times and they told me there is not prepayment penalties. But since the mortgate was sold to Wells Fargo, I will just make sure. I have heard that some banks does not have the prepay penalties as long as the prepayment does not exceeds the 3% of the loan, but not sure if its montly or annually..

[jade_arb 3]

Read the fine print on your mortgage and know your state laws, if you are even a couple of days late on a payment, your mortgage company can start foreclosure proceedings. But is you are paid a couple of years in advance, they cannot touch you.

Another means of foreclosure is your property taxes, really don't know why we put up with that and do not storm our government, even with your home paid off a constant threat with no reasons like health, loss of income, severe losses in your 401K plan as not valid reasons to keep from paying these taxes or even reducing them. Their constant waste of our hard earned money comes first. Before thinking of buying anything, a car, TV set, or a new refrigerator, that money for taxes has to be in the bank first. Even for a home that is only large enough or even overcrowded for your family. Renters are not exempt from that either, not only have to pay for the principle and the landlords interest, but those damned taxes as well plus some profit for the landlord.

The lending company set up our payments that include property taxes, home insurance and actual mortgate payment every month, I wanted to pay the home insurance in advance for a full year and taxes when they are due. Our mortgage payments are not that high without taxes and home insurance. But they told me NO. You need to agree to pay it monthly and the escrow company will pay your taxes and insurance...

what leave wondering what if they do not make the payments on time?!

[NickD 203]

Read the fine print on your mortgage and know your state laws, if you are even a couple of days late on a payment, your mortgage company can start foreclosure proceedings. But is you are paid a couple of years in advance, they cannot touch you.

Another means of foreclosure is your property taxes, really don't know why we put up with that and do not storm our government, even with your home paid off a constant threat with no reasons like health, loss of income, severe losses in your 401K plan as not valid reasons to keep from paying these taxes or even reducing them. Their constant waste of our hard earned money comes first. Before thinking of buying anything, a car, TV set, or a new refrigerator, that money for taxes has to be in the bank first. Even for a home that is only large enough or even overcrowded for your family. Renters are not exempt from that either, not only have to pay for the principle and the landlords interest, but those damned taxes as well plus some profit for the landlord.

The lending company set up our payments that include property taxes, home insurance and actual mortgate payment every month, I wanted to pay the home insurance in advance for a full year and taxes when they are due. Our mortgage payments are not that high without taxes and home insurance. But they told me NO. You need to agree to pay it monthly and the escrow company will pay your taxes and insurance...

what leave wondering what if they do not make the payments on time?!

That's the whole psychology in dealing with lending institution, not only the lowest interest rates, but all those little details, could be earning couple of extra bucks in interest instead of being forced into a tax escrow account, with the newest question, are you going to hang on to my mortgage or sell it to a loan shark? Get that in writing, courts don't listen to verbal statements.

Son got involved with such a bank, and kind of crazy when you sign your life away, and smile, when in reality, you have been screwed. Got his dad involved, read all the fine print, found a different bank without restrictions, even a lower interest rate, paid off his old loan and much happier now, but did cost him an extra thousand in closing cost, he got that back quick.

I am in a pretty good position to build another home now, have the cash and the time, but still kicking it around. One thing is crooked building inspectors, haven't met an honest one yet let along knowledgeable, and don't tell me these guys aren't getting a kickback from local contractors. Easy way to beat that is to build out in the country where they don't have these crooks. But then there is the DNR and EPA to deal with under the pretense, they are concerned about your safety, like you are a complete idiot. Then are key utilities available, and the rates, can really get creamed in this aspect as well, know the assessment rates, so many bucks per thousand of assessed value. Then dealing with the land owner for a fair price, land is worthless until you try to buy it. Would need help, normally like to find individual contractors that have their own insurance and pay their own taxes. If you just hire a couple of guys, have to deduct taxes and put up with the IRS. Then where to build it, houses stuck out in the middle of nowhere do not have good resale value. So it does get pretty complicated.

Remodeling is getting crazy, not only to they try to charge you for a pile of junk, you have to work hard and pay through the nose to get rid of it. Much easier to start from scratch. Feel many of these homes should depreciate faster than your car.

Your biggest obstacle is competing against a very stupid American buying public, always manage to find an idiot willing to get screwed. So I just think about building a new home, but still looking. Ha, almost easier to find a good soulmate, must be looking in the wrong country to build a home, had to go abroad to find that.

[Heracles 417]

Save up a six to eight month emergency fund, then pump the money into the loan. Don't bother keeping cash in savings as in this economy you will not receive anywhere near the 5 or 6% you are paying in interest. Same goes with investing.