Reader Story: How I Cut 16 Years from My Mortgage in Just One Hour
Published on - January 10th, 2010 (by J.D. Roth) This guest post from Caitlin of ClutterCubed (a blog about ridding clutter from your life) is part of a new feature here at Get Rich Slowly. Every Sunday will include a reader story (in the new “reader stories” category). Some will be general “how I did X” stories, and others will be examples of how a GRS reader achieved financial success.
Back in September, one hour of my time cut 16 years off my mortgage! It was one of the easiest things I’ve ever done, but I can honestly (and sadly!) say I probably wouldn’t have done it if it weren’t for Get Rich Slowly.
However, this is less of a tale of ringing triumph, and more of a story that shows how financially clueless I was, while you all point and laugh how even people who make financial missteps can put themselves back on the right track.
My shiny new mortgage
In mid-2008, my husband and I bought a shiny new house and acquired a shiny new 40-year mortgage. That’s right: a 40-year mortgage. It’s embarrassing to admit now, but the banks we talked to assured us that 40 years was “the new normal” for first-time home buyers like ourselves.
This was, of course, right before the crash and the economic downturn, so at the time our 5.5% mortgage rate looked pretty spiffy. As first-time buyers, we could have gotten away with a 0% down payment, but over the years we’d saved enough for a 7% down payment (thanks in part to a small inheritance my husband received). We felt smart. We felt like we were doing the right thing, like we were ahead of the game.
Unfortunately, as we later learned, there’s a big difference between feeling like you’re ahead, and actually being ahead. We didn’t know about the trick of planning mortgage payments before you have to start making them, so we hadn’t been putting away “a mortgage payment” every month prior to moving in. We also had no emergency fund to speak of.
By the numbers
We had, at least, planned our housing costs so that they wouldn’t be more than 28% of our gross income. I don’t remember where we got that number, since at the time we did not really read any personal finance books or blogs. I think we just pulled 30% out of Google, as a financial rule of thumb, and then aimed for a bit less than that.
Because of little things like that, we thought we were doing great, but looking back there are a lot of things I wish we had done differently. (I wish I’d started learning about personal finance before buying a house, for one thing!)
Properly taxes were included in our mortgage payments, and they’d been over-estimated to avoid needing to make a big payment once our house was reassessed this year (since the last time it had been assessed was in 2007, when it was still a dirt lot).
This September our mortgage payment came out automatically as usual, but we were really worried when $180 less than normal was taken from the account. I panicked and called the bank, thinking it was perhaps a mistake, and there would somehow be consequences for not making a full payment. The bank assured me everything was okay, and it was just that our property taxes had gone down after a reassessment, so our payment had been adjusted.
A profitable hour
The Old Me would have celebrated having an “extra” $180/month to spend. The New Me, the one that reads Get Rich Slowly and other personal finance blogs and books and is actively trying to improve my financial situation, immediately booked an appointment with the bank. My husband and I agreed that, since we’d been paying our mortgage all year without any problems, we should keep paying the same amount.
At the appointment, we not only bumped our payment back up to what it had been (paying an additional $180 on every payment, or an additional $2160/year), we also switched to a biweekly payment plan, with payments equal to half our monthly payment, so that we would be making an additional full payment (plus an additional $180 on that payment) every year.
In that one hour appointment, we watched our projected mortgage end date shrink down to 23 years. One hour of our time saved us 16 years of payments and interest.
It still boggles my mind.
All it cost us was an hour of our time. Well, an hour of our time and $45 for a one-time payment to make the switch possible. I’m not too thrilled about the $45, but I’m not upset about it, either.
Action beats inaction
I’ve read it dozens of times on PF blogs: overpay your mortgage, make an extra payment each year. Blah, blah, blah. Even seeing the occasional calculated example didn’t really drive it home for me. It always felt like I couldn’t be like “those people” — the ones with enough extra money to do fancy things like prepay a mortgage. I was afraid of screwing up, of doing it wrong. However, like J.D. says, action beats inaction, and in this case, he’s 100% correct!
I say thank you, J.D., for having this blog and inspiring me to get off my butt about my personal finances. Without you, I might not have had the drive to make that appointment with the bank that saved me 16 years. Without your blog and your readers, I may have known intellectually what I should have done, but it would probably have seemed out of reach.
I might have been content with my “found” $180/month. I might have handled it responsibly, and used it to pay off debt at least, but I know I wouldn’t have switched to biweekly payments. It seemed like such a hassle. It seemed like such a pain to set up. It felt like it couldn’t possibly be worth my time and energy to shuffle around my schedule, get my husband home from work early and go talk to the bank. Even though I “knew” it was worth it, I didn’t actually believe it until it happened. It was worth it! I had such an amazing feeling as I left the bank!
Have you had such a big payoff from investing a little bit of your time? Can you beat knocking 16 years off the mortgage in one measly little hour? Let us know in the comments!
Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.
This article is about House and Home, Reader Stories
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Hey Kevin,
Interesting arguments.
I don’t think I’d characterize all poor people as high-school dropouts necessarily, and I don’t think they all simply fancy themselves as being unlucky.
Some people were actually born underprivileged while others are born with more opportunities, which contributes to unequal classes.
Of course, there are people that are lazy, drug addicts, etc., and I’m not saying we should necessarily help everyone or that we can, but it seems to me that helping the struggling poor reach out of economic poverty would be helping to manage and improve the overall economy.
I agree with you that I don’t necessarily think it’s the government’s job to help all people buy a home, no matter how poor they are, but helping qualified people that just need that extra bit of help would benefit us all in the end, and probably cost less money than the alternative of perpetual poverty costs this nation.
I also somewhat agree with your moral hazard argument, as it doesn’t seem fair to help some while not others, based on a simple set of criteria, but to help none instead also has its moral consequences, and it also doesn’t seem fair that some are born in poverty and have to attend subpar schools while others get every opportunity America has to offer.
I don’t think success is punished in the U.S. necessarily, but that the “rich” pay higher taxes, because they’ve benefited more than others from opportunities in America, which is not always solely because of their superior efforts, some people are just lucky to be born with more chances to do better.
Not all people of course, as there are many gray areas, and of course, many successful people worked very hard to achieve their successes and deserve all that comes with it.
Thanks for the response and information, I appreciate it.
Hey Shara,
Thanks for your insights.
I’m not necessarily sure if the recent economic events are a sole indication in themselves that Fannie Mae and Freddie Mac don’t work, as there were probably many other factors involved as well, like people purchasing much more expensive homes than they should have.
I agree that not all people should be homeowners, as some will make bad decisions and for one reason or another not be able to afford to make their payments, but that doesn’t mean that people who work hard but can’t otherwise overcome the hump shouldn’t be provided with some sort of assistance.
I don’t necessarily want to help any poor person purchase a home, as that’s probably impossible, but people who have proven themselves as hardworking and willing to take on the responsibility, and just need that extra help. There would have to be a screening process of some sort.
I also appreciate your compensation and motivation argument, but sometimes when people are starving, you have to give them some fish, just so they have the strength to move on. You can’t just let them starve to death when they don’t have the strength to cast out their fishing line.
I would also say that people with severe economic limitations should also fall into the category of people who need housing assistance.
I mean, I agree with everything you’re saying in many ways, and in a clear cut world, it all makes sense, but I just don’t think America is so easily dissected as to say poor people all make bad choices, so it’s their fault, and rich people all work hard, so they deserve everything they have.
Of course that’s true in some cases, but not in all cases, and I just think the benefits of helping people who are struggling outweigh the consequences of not helping them.
Anyways, thanks again for the opportunity, I appreciate your efforts to provide such great information.
Max
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@ Max
“…but helping qualified people that just need that extra bit of help would benefit us all in the end…”
Great sentiment! Bravo! But wait…it is really easy to say and I don’t think anyone would disagree with you, but you need to define what you mean by ‘qualified’ and ‘that extra bit of help’. On top of that you have to define your metrics. How do you measure qualified after you define it?
So how do we define a poor person who qualifies for help? Can’t be on drugs (good luck proving that), have a great payment history (paperwork nightmare, or they’d have the credit for financing without help), makes good financial decisions (based on what?)…sounds like someone who actually has knowledge of specific people would be in the best position to judge who is deserving of help. Maybe an organization more like Habitat for Humanity?
And “that extra bit of help”?! You are talking about handing over $100k+ of taxpayer money to a person with no skin in the game. To me “that extra bit of help” is a box of food, defraying medical bills, tuition assistance, things that either help a single desperate situation or are in that ‘teach a man to fish’ category.
Regarding Fannie Mae and Freddie Mac, I didn’t say recent economic events are a sole indication. I said recent events have shown. Both are bankrupt and have shown themselves infested with government cronies, though you don’t seem concerned with the thought of government running these at a loss since they are trying to help the poor. But a lot of people who are ‘hardworking’ and ‘willing to take on the responsibility’ aren’t able to handle a house and mortgage. And it isn’t kindness if you set someone up for failure. Once again as a landlord I have found time and again that it is kinder to evict someone and force them out as soon as they miss a payment than to let them fall further and further behind. I have tried it both ways and anyone I let get more than a month behind has ultimately declared bankruptcy. Those forced into more affordable housing are more likely to get their feet under them before it’s too late.
Regarding your worldview, others have different perspectives but this is mine: I have never…NEVER…known someone who worked hard, lived a clean life, and was mentally and physically capable to remain poor in America. They might not get rich, but they weren’t poor, at least not for long. We all have setbacks, some more than other. No, we don’t all have the same capacity. So? Welcome to reality. If you caste yourself (or others) as victims of the universe you don’t do yourself (or them) any favors.
And in this end where it is written that everyone should own a house, be they poor or rich? Everyone has access to housing via rent. If they don’t own a house the alternatives aren’t bad. In fact on my rental right now I charge less rent than I pay for the mortgage, and I bought it for ~$50k less than it’s worth now. That’s a great deal for my renter!
Ultimately I think you fall prey to the fallacy of unintended consequences. THE PATH TO HELL IS PAVED WITH GOOD INTENTIONS. That can be illustrated on the macro level with government programs, as well as micro level with parents that don’t let their kids experience the least discomfort.
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Well said, Shara, I agree 100% Thanks for your comments. As a landlord, you were able to offer a perspective I couldn’t.
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Hello Shara,
As a landlord, you definitely have a perspective that I don’t and knowledge that I don’t, so I truly appreciate what you are saying.
No, I haven’t defined my metrics, as I just came up with this idea last night, but I don’t necessarily think it would be beyond our current capabilities to measure who is qualified once it is defined.
Yes, we’d have to use certain social systems that are in place to assess people, but banks are able to assess loan applicants based on financial criteria, work history, etc., so why shouldn’t the government be able to.
Some of these people may qualify for financing without help, but they may not be able to obtain affordable interest rates or afford the large down payment required by banks, that’s where these low-interest loans would come in, and as you said previously the current Mae/Mac programs in place.
I guess I’m basically talking about a government run bank strictly for housing loan purposes that would make the other banks have to be more competitive, sort of like the idea for a government health care option. Not exactly, but that’s the basic idea.
The skin in the game would be the house, if they failed on the loan, the house would belong to the government, just like in a regular bank loan. We’d need additional support programs to manage those different aspects as well.
And just because an organization is full of government cronies does not make the organization itself corrupt or a failure, it’s just the people running it. I don’t think people in power taking advantage of a situation is a reason to punish the poor that need the service.
With all due respect to your personal experience, just because you haven’t known somebody who worked hard that remained poor, doesn’t mean they don’t exist.
I also wonder if it will be a great deal for your renters when you decide to sell the home for a large profit in the future and evict them to go find another rental situation after they’ve helped you pay off your mortgage. Not that you’re doing anything wrong, but you’re not necessarily doing them any favors either.
And just to clarify, I’m not personally casting myself as a victim in any way. This really has nothing to do with me, as I’m well off compared to others and just bought a home through the usual channels. I’m not even trying to caste others as victims of the universe, but I do believe everybody has setbacks, some from birth, and some people need help as a result of it.
Maybe you’re correct in your assessment that my good intentions will have unexpected consequences, but I wonder what consequences will result when we resign to the status quo.
Thank you again for your help, you truly have a wealth of information to share.
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The banks DO assess loan applicants based on criteria. And they are very careful when they do so because their livelihood depend on it. If a loan officer makes too many bad loans they won’t have a job. That just doesn’t happen in government. I think the crux of the matter isn’t ‘is it possible’ but ‘is it probable’. Point me to a government program that functions within its projected budget. Now tell me a government agency people are happy to work with because their customer service is so admired. It just won’t happen.
And what makes you think we need a special government anything to force companies in the free market to compete? I already have plenty of banks (and health services) advertising for my business. A commercial for Lovelace Women’s Hospital is on my radio as I type this. With the previous paragraph fresh in your mind what makes you think I’m going to be happier with a government run option of anything? The only thing they may have going for them is the ability to keep up front costs low by taxing me on the backside to subsidize them.
I never claimed that hardworking poor don’t exist. Just like I’m sure the “Pretty Woman” hooker with a heart of gold exists. But I also know that the vast vast majority of prostitutes in the U.S. are addicts. I have known many poor people, I grew up poor and worked damn hard for a better life. I have my fair share of deadbeat relatives as well and have decided I am either lucky, or care about nothing but money. I am lucky, but luck favors the prepared.
You chided Kevin for putting words in your mouth. So tell me where did you get the idea: “…but I wonder what consequences will result when we resign to the status quo.”? I didn’t see anyone advocating the status quo, but I will point out that human misery will always be part of our imperfect world, and trying to set up a program that will catch every last one of them is not feasible. The only way to help people at the extreme is through personal intervention. You’d do better to find an individual who needs help than advocating a bureaucracy. Think Katrina vs Mississippi River flooding.
Regarding my renters, don’t let your heart bleed. If there is a lease I don’t believe I can sell it out from under them in my state, though I’m not sure because I haven’t looked into it and have no intention of doing so. But my mortgage has nothing to do with them. You see they aren’t “helping” me pay the mortgage any more than I am “letting” them rent it for less than cost. I never claimed to be doing them a favor. It is a business agreement, a contract with terms to which we have agreed. And who says I will sell the house at a huge profit? I am up ~$50k right now, but house prices are projected to potentially drop another 10-15%, negating most of that. Where is my profit then? What about my costs? Should my feelings be hurt that I took a >$10k loss on my house because of a tenant that used the bankruptcy court to deny me over half a year of rent while he lived there (he filed a knowingly false bankruptcy to get the court to halt our eviction)? Or am I one of those evil people getting rich on the backs of the hardworking poor and I can just eat it? Because from my perspective I have more poor people taking advantage of me than the other way around.
And believe it or not I didn’t believe you play the victim. Your tone is all wrong. You have more the tone of someone who has a patronizing attitude toward those below you. People like that often think a lot more of themselves than other people (“I know I did it, but I’m special. You’ll never succeed.”). But you strike me more as someone who thinks well of yourself because you have so much empathy for other people.
Well I’m not. When my two year old falls I don’t run over and scoop her up and ask her where it hurts. I give her a cheer and encourage her to pick herself up. If she needs a hug and kiss of course I’ll give it, but I don’t swoop in to fix it until she lets me know that’s what she really needs.
I can give you empirical evidence. I can even show you studies that show that a hand-up in the way you have described usually turns into a hand-out. But I won’t convince you of anything until you have a bit more experience under your belt, and maybe not even then. But you never answered what I thought was my most important question: Why does everyone deserve to own a home? The rest of this discussion (at least for me) is just an exercise in gently introducing you to reality (which I admit hasn’t worked from your “yes, but” tone). Why do we even need your theoretical government intervention? Why isn’t renting good enough for a segment of the population who simply can’t afford it? Why must we MAKE it affordable through these financial contortions?
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Hello Shara,
I don’t think I indicated that “everyone” deserves to own a home, just that I believe there should be more options for hardworking poor that want to buy a home.
I bought a home because I’ve been lucky in life as well, not because I’m special, and everyone has a chance to succeed, we all just don’t start in the same place.
I don’t know where my tone was patronizing towards those below me (that’s not exactly how I would personally describe them), but if it was, then I apologize to those that I offended.
I’m sorry, I took your statement that you never knew a hardworking person that remained poor as a claim that the hardworking poor don’t exist, I guess you just meant that you don’t know any, so I incorrectly read into that.
I guess you believe your ideas are a reality that you’re trying to introduce me to and I believe the same thing, but I don’t think you’re necessarily wrong, you’re probably correct in many aspects, but if you believe you know the absolute truth, then we’re probably both being patronizing.
My heart doesn’t bleed for renters, as I’ve been there, just like it doesn’t bleed for their landlords, as it’s all a part of doing business for profit.
I would just like to see more options available for those that let us know what they really need, so that help can swoop in to fix it.
Maybe that’s my lack of experience talking, only time will tell I guess.
Thank you again for your comments. I appreciate your points of view although I don’t necessarily subscribe to them.
Good luck to you.
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I don’t claim to know the absolute truth, but I do believe there is one.
And I started by saying I’d be happy to walk you through some economic realities. I wasn’t seeking information. But then again I’m not sure you are really either.
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@ Max there are options for hardworking poor people that want to buy a home, HUD and Habitiat for Humanity to start off. Everyone should still have to follow the same requirements for a home: a job or other verifiable source of income, a good credit history, and an acceptable debt to income ratio.
There are rules to every game and if you want to play the game you have to learn the rules. If you really want to help people send them the link to this and other PF blogs so that they can understand their finances and set themselves up for home ownership. It not a right it’s a priviledge and until they meet the requirements they should continue to rent. Home ownership is the “American Dream” but it’s not reality and it’s time for some people to wake up and realize that it’s not everyone’s dream.
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@Max:
“banks are able to assess loan applicants based on financial criteria, work history, etc., so why shouldn’t the government be able to.”
Because the banks build that cost into the interest rate they charge on the loan (see? It’s not all “profit”), whereas you’re proposing that the government lend the money for virtually free, meaning they’d (read: the taxpayers) have to eat the cost of all those background checks.
“The skin in the game would be the house,”
Again, I repeat: Have you learned nothing from the recent economic collapse? “The house” is not enough incentive for people to keep paying their mortgage. If someone owes $450,000 on a house valued at $250,000, they couldn’t give a rat’s behind about the house. They’ll just default, live in the house for free for a year until the bank gets around to kicking them out, then go back to renting. The bank suffers (this loss is built into the interest rate they charge on other loans; again, see, it’s not all profit), the neighborhood suffers, the economy suffers. It’s crucial that the individual have a financial interest in keeping current on their mortgage, and that means equity in the house. That is why 0% down loans are a terrible idea.
In the case of your 0% interest government loans, when a poor person with no down payment gets upside-down on their home and walks away, who eats the loss? The taxpayers.
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As a financial planner, I am not a big fan of setting up biweekly payments unless that is how your cashflow works on both your pay cycles. Normally I would rather see people make an addtional payment each year, that way if you are in a situation that you need the money for some other emergency it is available and not locked into something that gives you a relatively low rate of return (your mortage rate). Most people do not stay in their home until it is paid off, and having more equity in your home will not cause it to appreaciate any faster. If the money is cheap, utilize it and make some ground up else where. I would max out my 401K faster than pay down my mortgage since the extra payments are principle and not interest giving you no tax break on the payment.
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Great post Caitlin! We refinanced a few months ago to a bimonthly payment, and cut $500 off our mortgage payment. We’re using that money to pay down higher interest debts.
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Hello Wendy,
My original comment that led to this 100,000 homes for $100,000 idea was that I thought the bailout money and war funds being spent could be put to better use by providing low-interest home loans to low-income families. I mean, the 10 billion I propose is a drop in the hat to the 750 billion provided to financial institutions for the bailout, plus the auto industry bailout, and countless billions spent in Iraq.
Yes, there are rules to every game, but I don’t believe we’re all really on an even playing field if owning a home was to be considered a game.
Plus, there are rules to the banking game, but we bailed them out when they didn’t follow the rules, so why not low-income families (I don’t mean to necessarily insinuate that you supported the bailout with this line of thinking, just a thought).
I guess I’d like to make the privilege of owning a home more accessible to more people.
So just to be clear, you don’t support HUD and Habitat for Humanity either, correct, because those programs would be cheating the game?
I’m also not sure if providing people with links to the ivory tower of PF Blogs is really a solution in itself, but yes, education is important.
Hey Kevin,
Yes, there would be operating costs associated with such a plan, I agree with that. I can’t also help but consider the enormous advertising budgets that are spent by the big national banks, as those types of costs also affect the costs of loans for customers, and it seems a bit excessive.
I hear you on the $450,000 on a house valued at $250,000 scenario, but it seems to me that in this example, the original price of the house was probably a bit overinflated to begin with, although I guess that’s arguable based on market value.
I don’t think you’d see such a disparity in cost to value with houses in the $100,000 range I’m talking about, but yes, that’s a factor. And yes, neighborhoods do suffer because of foreclosures, and we could help that by putting some families back into those homes that are sitting empty now. It seems like the perfect time for such a plan at this moment in history.
I was originally saying like 1% or .5% interest loans, not 0% exactly (although that would be great), but my other statement was that the government would retain ownership of the house if a purchaser failed to pay their loan and then the government would be able to resell to get back some of that taxpayer money. Of course, there would be additional costs to that I concede.
I don’t know, I haven’t been working out this plan for months, which would be required to get all of the details worked out, but it’s just a basic proposal, the details would need to be ironed out further to make it work.
Even if it’s 15 billion with operating costs or 115 billion to increase the scope, I still feel it would be money better spent than bailing out the banks was.
Alright, thanks again for your comments.
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I just wanted to follow up to say I didn’t mean to capitalize the B in “PF blogs,” as there is an actual site of that name and I’m not referring to any site in particular with my statement.
I love personal finance blogs, obviously, but my statement was just meant to indicate that we exist in somewhat of a bubble that not everybody can relate to.
Sorry, I’m probably being oversensitive, but I don’t want anybody thinking I’m referring to a particular site or anything, just making a general statement, it’s not my intention to offend.
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OK. Sorry to be one of the few negative commentors, but I still don’t buy into the concept of paying off extra principal payments on your mortgage. At least, not until you are ready to refinance, or pay off the remaining principal.
Please correct me if I’m wrong.
Let’s say I have a 20 years let on my mortgage, and I’ve paid the equivalent of a years principal extra, I have effectively got 19 years left of mortgage. But I’ve paid off the last year of the mortgage. It doesn’t save me any money in the short term. My mortgage payment is still the same every month.
So why am I giving this money to my bank for 19 years with no return?
The only time I stand to gain financially from my extra payments is when I restructure my mortgage in some way recognizing that I’ve paid down on the principal. This would be i) if I re-finance, or ii) I am ready to finish paying off completely.
So why not put that principal payment into a Long Term Treasury or other safe instrument, that will expire in in time for when you are ready to re-fi or pay off. That why, you actually make money on your extra principal, until you are ready to put it to use.
If I’m wrong about this, I’d love to know the math.
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@David: If I pay off extra principle now, and not in 4 years (for example), it reduces the amount of interest I pay in those 4 years in the meantime. It doesn’t change my payment, but each payment will be paying slightly more towards principle.
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Paying off a mortgage ahead of schedule a great way to get ahead in the game of retirement planning.
I’ve approached BOA (My mortgage lender) about bi-weekly payments on a few occassions. I get paid twice a month so it makes sense. However, the fees they charge are ridiculous.
So, I’ve always made larger monthly payments.
However, recently I’ve found that I have extra cash in the middle of the month (Mortgage is due on the 1st, I get paid on the 15th and 31st). Rather than trying to hold on to the cash for two weeks I’ve been sending a 2nd payment on the 15th.
I cannot find any language in the mortgage note contract that would allow BOA to penalize me in any way for making more than one payment per month. In fact, the bank is quired to apply extra money to the principle and adjust the schedule accordingly.
So, why wuld I pay them anything to “change my mortgage”. Does anyone have any inisght about what the bank may say or do when/if they catch on?
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@Max. I can see that it appears that you are paying less interest in the amortization tables, but that doesn’t translate into real money until you finish your mortgage one year early. In the meanwhile you owe the same mortgage each month irrespective of how much extra principal you’ve paid, and you give the bank money that you could otherwise have put to use making money for yourself at a competitive interest rate.
The only way I see value in paying extra principal is if you can use it to remove PMI, or prior to a refinance or complete payoff of mortgage. Otherwise, you are giving the money to the bank for no return.
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@David. yes, I realize that they won’t recalculate your payment until your re-fi. I’m not sure I can get a risk-free competitive interest rate higher than my mortgage rate
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@ Max- I was not in favor of the bailout but my tax dollars were certainly used. I agree that we could make better use of our tax dollars but your idea of helping the poor buy a house, devalues the “pride of ownership” for others. Just because the banks didn’t follow the rules, doesn’t mean we should bend them for the poor. HUD homes allows poor people to buy homes that are affordable for them, and mitigates further value loss of the home sitting empty.
Your scenario devalues current home ownership. I think may people will wonder ” If I were poor(er), I’d have a no-low interest rate, why should I work my tail off to make a decent wage, save my money for a down payment, when I could go for one of those 100k houses.” Obviously it would depend on neighborhood, city etc. but, if it were in my neighborhood I’d have a big problem with that especially since it would be my tax dollars subsidizing their ability to live there.
All playing fields are not created equal nor are they all level, but the players learn to adapt and overcome. At the end of the day the game is played the same.
I believe everyone should have access to information. Maybe sending a PF link may not be approriate but printing it out, sending them to the library is an option.
Here’s another view of why more poor don’t own homes…http://www.bloodhoundrealty.com/BloodhoundBlog/?p=443
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I have a friend who always paid his property taxes himself… because he had an overly expensive house: 650K in TX at 2.5%/yr = over $16000/yr in property taxes. That is a lot of interest to give to a bank.
The plan worked until his business failed and he ended up without the 16$ saved up at the end of the year…
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The bi-weekly mortgage works for some people who are paid bi-weekly. However, if you’re paid semi-monthly like me, it doesn’t really work out.
Also, some companies charge a fee for setting up the bi-weekly. You can do it yourself for a lot cheaper.
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I wish everyone knew and used bi-weekly loan repayments. I’ve used it on every property owned which escalated my equity and profit when I sold by keeping my money working for me, in my pocket, instead of the bank’s drawer. Forget the “interest tax break” and be glad that you will own your house, title in hand, much faster and/or you’ll get much more money back in your pocket if you decide to sell instead of hold on to the property.
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