Mortgage Acceleration: My First Additional Principal Payment

Principal Mortgage Payment

So I just wrote the check for my first extra principal payment. We’re halfway through 2015 and my goal is to apply an additional principal payment with each of my remaining mortgage payments through the remainder of 2015. Ideally, I’d like to send in at least double the amount of principal that is being paid with my standard payment each month, but we’ll see what happens… that might become difficult around Christmas time.

My April mortgage payment had already been made, but I still wanted to get in an additional principal payment prior to my May payment being made, so I wrote a check for $2,500 and sent it in today. This payment will basically be applied as additional principal to my April payment (as long as the receive and process it prior to my may 1st payment), so let’s take a look at what this will do to my mortgage balance and next months principal and interest payments.

Month	Amount to Interest	Amount to Principal	Mortgage Balance
April Payment (No Acceleration)	1,260.57	249.20	237,034.28
Resulting May Payment	1,259.24	250.53	236,783.75
April Payment (With Acceleration)	1,260.57	2,749.20	234,534.28

Now, with the obvios fact aside that I spent an extra $2,500 on my April mortgage payment, let’s look at the resulting July mortgage balance and the resulting principal and interest payments. I’m decreasing the amount I’ll have to pay to next months interest by $13.28 – Yes, this is very small when compared to the $2,500 I just forked out, but let’s consider it over the course of the next year.

Assume I don’t make another additional principal payment, then I’ll be paying $14,857.40 just to interest over the next year, whereas if I had not made the additional principal payment, I would have been paying an additional $15,021.52 to interest over the next year. A differenct of $164.12. I still have 28 years remaining on my loan, so considering just a year is a very insignificant amount, but if we compare it to what I’ll pay to interest for the remainder of the life of my loan, that’s where we’ll see bigger savings. With the additional $2,500 principal payment, I’ll be paying $262,553.97 toward interest over the remaining live of the loan, and without the additional principal payment, I’ll be paying $274,772.74 to interest over the life of the loan. This is a savings of $12,218.77 – just for making an additional $2,500 payment today. More importantly, I’m also shaving 9 payments off of my mortgage, having my final payment of $373.92 coming due on 12/1/2035 rather than 9/1/2036.

Reverse mortgages give seniors who are no longer able to work or generate income a way to leverage the equity in their house to start receiving a monthly income once again. The payments received from the reverse mortgage can be used to pay medical bills, credit card debt, or any other expenses that may be necessary.

Qualifications & Requirements of a Reverse Mortgage

You must be 62 years or older, and the home that the reverse mortgage is being taken against must be your primary residence.

How much money can I get from a Reverse Mortgage?

The reverse mortgage amount will depend on your age, interest rate, and the value of your home. Typically, the more valuable your home is and the older you are, the more money you will be able to borrow with your reverse mortgage. A lower interest rate will also affect the amount of money that you can borrow.

How will I receive the money from a Reverse Mortgage?
You will generally have three different options when choosing to receive money from a reverse mortgage. All of the amounts will be determined by the above criteria. Monthly payments, Lump sum, and Line of credit

Tricks to Lower Your Mortgage Payment: Is It Possible?

I often get asked if there are any tricks to lower your mortgage payment, and the short answer is NO. However, there are a few ways to decrease your monthly mortgage payment, but those options will require a little legwork on the side of the borrower. With the economy in the state that it is currently in, I’m going to focus on 2 main ways that mortgage payments can be reduced.

Refinance Your Primary Mortgage

Flickr Photo: Uploaded on October 20, 2008 by woodleywonderworks Refinancing your mortgage will typically be the best option, as it can save you hundreds of dollars per month if you’re refinancing from a high interest rate to a lower rate. Let’s look at an example, lets figure that I took out a $250,000 mortgage loan 5 years ago with an interest rate of 7.25%. At this loan amount and this interest rate, my monthly payment will have been approximately $1,705.00 per month. As of the time of this post, I’ve seen interest rates for 30 year mortgages as low as 5.75% – the interest rate will depend on your lender, your credit score, payment history, etc. so you’ll have to talk to a mortgage broker prior to getting a firm rate quote, but for the interest of our example, we’re going to figure that we can get a loan at a rate of 5.75%. For simplicity sake, lets compare a $250,000 loan at 5.75%. At this interest rate, our monthly mortgage payment will be approximately $1,459.00. This is a savings of $259 per month. A couple things to remember are that:

In this example, we figured that we’ve had our original loan for 5 years. If that were the case, we wouldn’t still need a $250,000 loan, we’d actually only need a loan for about $235,950 (let’s figure $236,000 for simplicity). Plugging that amount into a payment calculator will yield a monthly payment of $1,377.00 per month, yeilding a savings of $358 per month.

You’ll have to take into account loan processing fees. Typically you’ll be paying processing fees, points, etc. which could end up being a couple thousand dollars. When I refinanced, I wrote a check for all of these fees ($2,900 in my case), however I believe that you can have these fees rolled into the cost of your new payment.

Trying to Refinance to a Lower Interest Rate: My Refinance Was Denied

With interest rates in the high 4-percents to low 5-percents, now is the perfect time to refinance, especially for those of you who may currently have an adjustable rate loan. If you’re looking to get out of your adjustable rate loan, there is no better time than the present to get yourself into a fixed loan. However, the biggest problem with trying to refinance right now is that many homes have dropped in value, so the homeowners equity may not be what it needs to in order to refinance.

Take my case for instance. When I bought my condo 5 years ago, I paid $290K for it, and at the peak of the market, its value approached $475K, but right now, it’s value is only appraising at about $250K. This sucks, because in order to refinance, I can only borrow 80% of my homes equity, or $200K if my home appraised at $250K exactly. The banks don’t take into consideration that I’ve been on time with ever mortgage payment over the last 5 years, and that I’ve even made extra principal payments in some of those years in order to accelerate my mortgage.

If you have enough equity in your house, now is the time to refinance, but if your home value has dropped, as most homes in the Southern California area have over the past year, you just may find yourself in a situation similar to mine – having your home refinance denied. It’s a very unfortunate situation when someone like myself who takes pride in having great credit has a refinance declined because of the current state of the market.

I’m currently looking at a couple other options that will help me get refinanced, and I’ll keep you all posted if I find a way to lower my interest rate.

Wells Fargo Principal Reduction: Is It Possiible?

As with many other California homeowners, I’ve now found myself a bit upside down in my mortgage. I’m still able to pay my monthly payment, but if I wanted to move or sell my house, its just not going to happen. I’ve been reading articles and reports that Bank of America is offering many principal reduction programs in order to keep people in their houses, however I have not heard the same about people stuck in mortgages with Wells Fargo.


Here is some information on how the Bank of America loan modification may work:

Here’s how it will work, according to Bank of America officials: Say you’re deeply underwater on a subprime mortgage you took out from Countrywide Home Loans, which was acquired by Bank of America in 2008. The mortgage balance today is $250,000, but the house is worth only $200,000.

If you meet eligibility requirements, the program could reduce your balance by $50,000 and your new payments would be based on the lowered principal debt and possibly a lower note rate. This would be accomplished by the creation of an interest-free forbearance account covering a five-year period. Assuming you made regular payments at the modified, lower amount during the first year, $10,000 would be forgiven by the bank.

Whatever the case may be, I’m sure that many people are quite a ways in the red and won’t be able to get out of their current home loan situations without the help of their lenders or bankruptcy. It’s an unfortunate situation, but it’s true.