Posted on: 09th Aug, 2008 05:50 am
Hi! WE are mortgaging $350 k for a new home, but several months after closing we may be able to pay off another 110k towards the principal of the mortgage. Our question is.. will our monthly coupon payments drop or will the life of the mortgage just be shortened? do we have a choice in the matter? THX
Hello se_roma,
Wow, $110K to apply to your principle! You are correct in that it will shorten the life of your loan. It will also decrease the amount of interest you will pay for the life of your loan, i.e the loan will cost you less.
Example (based on fixed rate):
Loan amount $350,000.00
Annual interest rate 7.000%
Loan period in years 30
Start date of loan 1/1/2008
Monthly payment $2,328.56
Number of payments 360
Total interest $488,281.14
Total cost of loan $838,281.14
Loan amount $350,000.00
Annual interest rate 7.000%
Loan period in years 26
Start date of loan 1/1/2008
Monthly payment $2,438.93
Number of payments 312
Total interest $410,946.62
Total cost of loan $760,946.62
(these are approx figures)
Unfortunately, unless the loan is rewritten/refinanced the payments aren't likely to change change. :(
Example:
Loan amount $240,000.00
Annual interest rate 7.000%
Loan period in years 30
Start date of loan 1/1/2008
Monthly payment $1,596.73
Number of payments 360
Total interest $334,821.36
Total cost of loan $574,821.36
Notice the difference in the savings?
Wow, $110K to apply to your principle! You are correct in that it will shorten the life of your loan. It will also decrease the amount of interest you will pay for the life of your loan, i.e the loan will cost you less.
Example (based on fixed rate):
Loan amount $350,000.00
Annual interest rate 7.000%
Loan period in years 30
Start date of loan 1/1/2008
Monthly payment $2,328.56
Number of payments 360
Total interest $488,281.14
Total cost of loan $838,281.14
Loan amount $350,000.00
Annual interest rate 7.000%
Loan period in years 26
Start date of loan 1/1/2008
Monthly payment $2,438.93
Number of payments 312
Total interest $410,946.62
Total cost of loan $760,946.62
(these are approx figures)
Unfortunately, unless the loan is rewritten/refinanced the payments aren't likely to change change. :(
Example:
Loan amount $240,000.00
Annual interest rate 7.000%
Loan period in years 30
Start date of loan 1/1/2008
Monthly payment $1,596.73
Number of payments 360
Total interest $334,821.36
Total cost of loan $574,821.36
Notice the difference in the savings?
You can call your lender and ask them to do a modification based on your principle reduction....
as usual, i will agree with cedric. you can request a modification to reduce your monthly obligation.
however, if you choose to continue to pay the current required payment, you will retire this loan far earlier than the contractual period. if you can afford to do so, i would think this might just be the best move at this time.
refinancing is also an option, but i would rank it third in the line of priorities.
however, if you choose to continue to pay the current required payment, you will retire this loan far earlier than the contractual period. if you can afford to do so, i would think this might just be the best move at this time.
refinancing is also an option, but i would rank it third in the line of priorities.
