I am considering refinancing my home. My two year ARM is about to expire. I am thinking about getting an interest only loan and making "principal only" payments in addition to the scheduled "interest payment". This should allow me to reduce the principal much faster than following the amortization schedule that would come with a conventional 30 year fixed mortgage. If I do this I will be reducing the principal and correspondingly the interest due each time I make a principal payment. How do finance companies adjust the monthly interest payment, when the balance due constantly changes, on this type of loan.
I think this adquately explains the situation.
2007-03-27 03:58:24 · 4 answers · asked by specplusoh 2 in Business & Finance ➔ Personal Finance
A reasonable plan.
Check your current ARM and any new mortgage, however, for any prepayment penalty on refinancing or payment of principal. This is not an uncommon feature during the first 3 years of a loan particularly with ARMs.
2007-03-27 04:04:53 · answer #1 · answered by Anonymous · 0⤊ 0⤋
the payment amount will adjust monthly, as you make your principal payments. You will not realize a large difference on a payment month to month, because the balance on a mortgage is pretty big. It may be a few cents here & there depending on how much extra you pay, maybe a dollar or so.
Just make sure that you pay close attention to this type of loan. As you may be aware, these loans are under great scrutiny b/c it is so easy for a borrower to get in over thier heads with these. Be very carefull.
2007-03-27 04:07:53 · answer #2 · answered by ricks 5 · 0⤊ 0⤋
If the program is a 2/28, the adjustment could jump the interest rate up 2% from the original Interest Rate. Then every 6 months the interest rate will jump higher. It depends on the market as well as the current Loan. If you are planning on eventually paying off the home, you might want a 15yr fix or a bi-weekly plan to pay the home off sooner. Right now is the best time to get into a secured Loan.
Email me your situation and I can give you a more detailed explination.
Nathan grant
Ngrant@Pacifina.com
2007-03-27 08:22:32 · answer #3 · answered by Nathan Grant 2 · 0⤊ 0⤋
The payment would naturally adjust downward, considering you would be putting more towards the principal. It would become a little less each month to the point that your principle would be paid off, thereby ending your mortgage. I know some great resources for this kind of thing, just shoot me an email to msmith@premierloangroup.com, and well see what we ca do!
Marty
2007-03-27 04:03:40 · answer #4 · answered by Anonymous · 0⤊ 0⤋