My interest rate is 7%. Why is my balance almost $15,000 more than when I first purchased the house? I'm beside myself!! It there something in the math I don't see?
Thanks for your help!!!!
2007-05-14 13:41:53 · 6 answers · asked by Ellen 1 in Business & Finance ➔ Renting & Real Estate
You probably have what is known as an 'Option ARM' where you are given a choice of 4 different payments
1) A minimum payment - calculated at a low 'teaser' interest rate
2) An interest only payment - calculated so that you are paying the interest, but not reducing the principal
3) A 30 year amortized payment - calculated so that you are paying off the loan in 30 years
4) A 15 year amortized payment - calculated so that you are paying off the loan in 15 years
I would guess that you have been paying the minimum payment. The problem is, the "teaser" interest rate that is used to calculate this payment is lower than the actual interest rate you are being charged, so each month you owe the mortgage company more than you are paying.
The mortgage company then adds the additional amount that you owe in interest (option 2 minus option 1) to the principal each month. So each month, the balance goes up a bit - this is called 'negative amortization'.
To stop adding to your principal balance, you need to, at a minimum, start paying the interest only payment. This will keep the principal balance where it is currently at, but will not pay down the principal at all.
In order to start paying down the principal, you need to start paying either the 30 year amortized payment, or the 15 year amortized payment.
If you cannot afford to do any of these payments, you cannot afford the house with the mortgage that you have, and you either need to refinance or sell the house.
2007-05-14 13:55:19 · answer #1 · answered by aj485 5 · 4⤊ 0⤋
You have left something out of your question. You say an adjustable rate but if it has gone up in principle it sounds more like a reverse amoratization loan. With this type of loan you have smaller than normal payments for a specified number of years.
Without knowing loan values I have to guess. A loan payment for a $100,000 30yr loan is $665 for Principle and interest. If you send back the actual loan amount I can tell you what your monthly payment should be. If you are paying less then you do not have a normal loan.
2007-05-14 13:53:16 · answer #2 · answered by ttpawpaw 7 · 2⤊ 0⤋
You clearly have a mortgage that allows you to defer interest payments and have them added back into the balance.
As you can see, that means you will pay interest on the interest.
As a mortgage professional, I can honestly tell you that I have NEVER sold one of these mortgages to anyone that was anything less than very financially asute. And even then, I reitterated the facts about this type of loan.
Regardless, you need to REFINANCE out of that mortgage... ASAP! And while I am on the subject, do NOT use the lender you used before. Instead, use one that has your best interests at heart... rather than their commissions.
2007-05-14 14:54:09 · answer #3 · answered by your_in_goodhands 2 · 2⤊ 0⤋
Why would you will desire to shop any loan? you have 3 possibilities: a million. shop the winning loan. 2. Refinance the winning loan. 3. sell the domicile and payoff the loan. possibilities # a million and a pair of rely on your targets. Why do no longer you desire the winning loan? in the adventure that your purpose is to refiance the loan to get a decrease fee, then selection #2 is wise until you have a prepayment penalty meaning in case you repay the loan previously a definite time you will be charged. to make certain study the loan place of work work or have an adviser study it like an lawyer or pal.
2016-12-29 04:37:29 · answer #4 · answered by ? 3 · 0⤊ 0⤋
you got screwed into a mortgage where your loan amount goes up instead of down. maybe next time when a rate sounds to good to be true.. it is possibly not true =(
2007-05-14 18:00:36 · answer #5 · answered by daniel H 1 · 0⤊ 0⤋
pick a payment program
Sorry to hear that
.99% starting rate
2007-05-14 16:11:27 · answer #6 · answered by ron d 3 · 0⤊ 0⤋