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View Diary: The bank said 'You'll be back.' (549 comments)

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  •  You could always take a 10 or 15 year loan (9+ / 0-)

    And make extra principal payments to shorten the term to whatever you want it to be.  I don't think I've seen a mortgage with any kind of prepayment penalty, though they may exist with some less than exemplary lenders.

    •  I thought most mortgages had (4+ / 0-)
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      pixxer, frustrated1, Philpm, sb

      pre payment penalties.

      The federal government is basically an insurance company with an army. Paul Krugman

      by Heart of the Rockies on Sat Nov 05, 2011 at 07:42:11 AM PDT

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      •  Not to my anecdotal knowledge (6+ / 0-)

        I've had a variable rate for 20 years (this year 2.125% down from last year's 3.125%) that has been sold and re-sold. I've never had over-payment issues, nor remember talking to anyone else who had.

        •  Ours always have had prepayment penalties, (6+ / 0-)

          but only for a few years. That's a good point, anyway. Pay extra principal (which we're doing anyway) and shorten the term that way. But a 15-year mortgage starts with a whole lot more interest than a shorter term would. Will definitely look into it, though. My CU just started having Saturday hours so maybe can call after this morning's activities.

          "Maybe this is how empires die - their citizens just don't deserve to be world leaders anymore." -Kossack Puddytat, In a Comment 18 Sept 2011

          by pixxer on Sat Nov 05, 2011 at 08:53:42 AM PDT

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          •  Bonne chance! (3+ / 0-)
            Recommended by:
            sb, pixxer, yinn

            Overpaying also has a built in buffer in the event of a financial emergency. If something did come up you could dial down the mortgage payments to the baseline, and not violate your contract/needing to re-finance again, in doing so.

            i am in a very similar boat in terms of age and years left to pay.  My guy says to lock in at a low rate, but I can't see why.  Even if my variable goes up 5 straight years (unlikely) I'll pay about that same as locking in a 5% rate today.  And by then my house is almost paid off anyway.

            But look at me. We are not discussing me.  :)

            look into it, and be upfront with the potential lenders. I bet you find a happy plan with a little digging.

          •  Pixxer, I think you're mistaken. (1+ / 0-)
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            15-year mortgages actually have a lower interest rate than 30-year mortgages.  I've never heard of a 15-year mortgage carrying a higher interest rate, even though the payments are higher because of the term of the loan.

            But maybe I've misunderstood, and you actually mean that the portion of your payment that goes to interest would be higher in the early years of the loan.  Of course that would be true of any amortized loan.

            "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

            by SueDe on Sat Nov 05, 2011 at 01:06:52 PM PDT

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            •  Yes. I was comparing the amount of total interest (0+ / 0-)

              that would be charged if we borrowed money for 15 years, vs. if we borrowed the same amount for 6 years, and also the fraction of the payment that would go to interest vs. principal.

              A loan expected to be paid back over 6 years is much cheaper with the same interest rate (less total interest paid).

              Also, right now, we are in the declining years of our mortgage - it's kind of amazing, actually - most of the payment is going to principal, not interest (hard to get used to ;). If we refi, most of the new payment goes to interest, not principal. However, the option of adding principal is always there, so we will look into it. Had a long discussion of it up in Tilden Park on our weekly walk :)

              "Maybe this is how empires die - their citizens just don't deserve to be world leaders anymore." -Kossack Puddytat, In a Comment 18 Sept 2011

              by pixxer on Sat Nov 05, 2011 at 02:18:51 PM PDT

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              •  Yes, you'll owe more interest if you take 15 years (1+ / 0-)
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                But a loan expected to be paid off in 15 and actually paid off in ahead of schedule in 6 would pay the same total interest as the loan expected to be paid off in 6.

                If you refi back to 15, it's not that you'll owe more interest each month (that's just principal * rate). It's that your minimum payment will be only slightly more than that interest owed, hence the payment is nearly all interest and it will take 15 years to finish the loan (and you'll pay far more total interest). But if you keep making the larger payment that you were making on your 6-years-left loan, even though you don't have to, you'll be paying the same fraction of principal to interest as before, and the loan will be paid off in 6 years (as before), and no additional total interest.

                That's all assuming the same rates, and ignoring the fees to get a new loan. Those are what you really need to compare to decide if a refi makes sense.

                •  Absolutely. Title fees and stuff. Ick. (1+ / 0-)
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                  We realized last April that we no longer pay enough interest on our home loan for it to send us into itemized deductions, which means that element of "keep the loan" is no longer a consideration. Thanks for your helpful ocmments!

                  "Maybe this is how empires die - their citizens just don't deserve to be world leaders anymore." -Kossack Puddytat, In a Comment 18 Sept 2011

                  by pixxer on Sat Nov 05, 2011 at 06:04:48 PM PDT

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          •  No, it doesn't start with more interest (0+ / 0-)

            The interest portion of each payment is the remaining principal times the rate; no more, no less. It's not as if there was 15 years of interest built into it from the start that you'll owe even if you pay off the loan ahead of schedule.

            Now, if you look at an amortization that assumes the a consistent (minimum) payment over the whole life of the loan, then yes, those early payments are almost all interest, because you have the highest principal early in the loan. As the small remaining payment to principal starts to reduce that, you owe less interest, meaning that same payment amount retires more principal, etc.

            But if you're planning to pay extra principal anyway, and if there's no penalty for prepayment, you just want the lowest rate, and the term doesn't really matter. It influences the rate, sets the minimum payment, etc but after accounting for those factors it doesn't change how much interest you'll pay.

      •  Most don't (5+ / 0-)

        In fact, getting a 15-year is so obvious to me that I am surprised the grandparent poster is even asking about it.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Sat Nov 05, 2011 at 08:20:44 AM PDT

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        •  We're more than halfway through our 15-year (5+ / 0-)

          mortgage right now. Anyway, will look into moving from Wells to the CU.

          "Maybe this is how empires die - their citizens just don't deserve to be world leaders anymore." -Kossack Puddytat, In a Comment 18 Sept 2011

          by pixxer on Sat Nov 05, 2011 at 08:54:48 AM PDT

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          •  Get an open end line of credit or a (2+ / 0-)
            Recommended by:
            Forbzee, pixxer

            home equity line of credit from the CU for the amount of the mortgage and pay off the mortgage with those funds.

            Goodbye bank.

            Which is good news for John McCain.

            by AppleP on Sat Nov 05, 2011 at 11:58:57 AM PDT

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            •  That's a great idea. We actually have (1+ / 0-)
              Recommended by:

              some mutual funds we are thinking of getting out of, too. It would be fun to walk into WF with a check for the rest of the principal. They'd get that any way you cut it, but it would be nice not to pay them interest.

              "Maybe this is how empires die - their citizens just don't deserve to be world leaders anymore." -Kossack Puddytat, In a Comment 18 Sept 2011

              by pixxer on Sat Nov 05, 2011 at 02:21:35 PM PDT

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      •  illegal in california (1+ / 0-)
        Recommended by:

        at least

      •  only bad mortgages have prepayment penalties (1+ / 0-)
        Recommended by:

        I've refinanced five times, shaving off half a percent point or so each time.  None had a prepayment penalty.  Ask up front!

        Silvio Levy

      •  Federally guaranteed ones don't, I'm pretty sure (0+ / 0-)

        Conventional loans allow much more leeway to the banks, but my current convention refinance only restricted me from paying off or re-refinancing for the first 2 years or something like that.

      •  I refinanced my 7 1/2% Countrywide (1+ / 0-)
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        mortgage last year down to 3.825% 15 year with BoA. It was the start of a year long disaster. They paid my home insurance twice, once from the old account  and once from the new one, which I only learned about this spring when my escrow doubled. (I got the extra payment back from my insurance company when I learned the problem.) Then BoA lost my May mortgage payment, claimed it would be replaced into my checking account and did nothing for three months except keep informing my that I had not paid my mortgage. Since my kid was diagnosed with cancer at the same time my time and energy was getting him through chemo (successfully, but the final test is next week.)

        I am now paying only by check. So BoA has started calling me on the 5th or 6th telling me I have not paid. The grace period is until the 16th and I have never been told I was late before the 16th. The girl on the phone was shocked when I told her that both she and her managers in the mortgage department of BoA are insane.

        One positive note. My BoA fixed rate 15 year mortgage has no prepayment penalty. I am now prepaying $20 per month and will increase that when my social security increases 3.6% in January.

        BoA was slapped together for no reason other than to make it larger. It has become too large for them to manage efficiently. That's why they lost my mortgage payment for three months. The bank should be broken up both my line of business and by region.

        Had I paid my mortgage from some other institution, the two institutions would have contacted each other, determined the problem and fixed it. Instead each time a single BoA employee tried to fix a problem that crossed between my checking account and my mortgage account and that one individual didn't know all the procedures for the other side. It's a typical merger problem and especially bad with banks because it is so hard to merge large computer systems.

        My checking and savings will go elsewhere, but it's too expensive to refinance just to move my mortgage.

        Democrats stand for Liberty, Security, Support of Families and Opportunity Whiskey Tango Foxtrot - over

        by Rick B on Sat Nov 05, 2011 at 08:32:20 PM PDT

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