Will my monthly mortgage lower, without refinancing, if I pay in lump-some?

Question

If I have a loan of 200k started say last month and my monthly mortgage is 700, and I pay off 50k in one lumpsome amount next month, will my mortgage be lower than 700 automatically without refinancing?

Is it different for any of the mortgage programs, 30 yr fixed, 7/1 ARM.

Answer 1

Your monthly mortgage payment will not change. You will just be done paying much much sooner. This is usually not a good idea though. If you have a lump sum you should use it to pay off any other debts. If you have no other debts, you should invest it in a stock fund.
If your mortgage is fairly new, you are probably paying 5.5 - 6.5%. With the tax deduction for mortgage interest, your actual cost is probably around 4-5%.
Over the long term, you will earn 8% in a stock mutual fund. Over the long term, paying down your mortgage will save you 4-5%. You can see why it's usually not a good idea to pay off a big part of your mortgage.

Answer 2

No it will not lower your payment but it will shorten your loan term. You might want to check if there is a Pre-Payment Penalty on loan first before you make that large payment or you might incur a fee. Another route a can go is Refi into a shorter term and when you refi put the $50k towards the loan at the closing so then you will be refinancing at a lower loan amount and shorter term or refi into a longer term. Bottom line is you would have to Refinance.

Hope this helps,
Mortgage Dog

Answer 3

I don't really know. You can however call up your mortgage company and ask them. My guess would be it might lower because the interest will not be as much since the amount of the loan will be less. If it doesn't lower you will in the long run be saving on the interest being paid in the long run if you do make higher monthly payments .

Answer 4

Generally speaking, No. Usually when someone pays a lump sum, they indicate that it is to be put towards PRINCIPAL, which pays down your loan amount. It basically shortens the loan because you continue to pay $700 a month, only much more goes to principal than would have if you still owed more.

HOwever, you CAN specify that a certain amount goes towards interest, which would mean that until that amount ran out, your payments would be significantly lower/non-existant.

Answer 5

Call your lender and ask them about something called a "modification of mortgage". Most lenders will agree to modify the mortgage (apply the principal reduction and then recast the payments on the new lower balance) for a fee.

This type of modification is available on almost all loan types but, perhaps, not from all lenders.

Answer 6

No, it will stay the same. Refinancing is the only way to reduce the monthly payment.

30 yr fixed basically says that the interest rate will stay fixed for 30 yr, your payment will stay the same. If you pay more than what you're supposed to, then it will shorten the period.

7/1 arm = the interest rate will stay the same for 7 years. After that it will follow the market rate (INDEX LIBOR). See bankrate.com for more info.

Answer 7

First thing is you need to check and see if there is an early buy-out clause!!!!

When you pay extra, you must tell the mortgage company you want that money to go toward the principle. Do not presume it will automatically.

And you mortgage does not change with the lump sum unless you refinance.

Answer 8

Your monthly payments will not come down but your mortgage will be paid off much faster. The only way to reduce your monthly payments is to refinance and pay extra towards capital. Good luck.

Answer 9

Very doubtful. The only time they do this is for drastic situations or if there was a re-negotiating clause in your original loan agreement(yes, these do exist.). An example would be if you were going to default, they might do this to help you to avoid foreclosure. Even though lenders have been known to do this it is very rare and you are most likely going to have to re-fi to get a lower rate.

Answer 10

We lowered our mortgage by not bathing or shaving for 12 days, then drinking before we walked into the bank.

They assigned us a program that is little known, and we were paying $1,465 a month, and it is now $890.

The government keeps the plan secret, but it is available.
.