Another question on mortgage approaches...?

Question

Let's say that we took out a $220,000 mortgage. Over the course of two years, the monthly payment pays off 6k (just guessing) and we also put another $30,000 into the principal. How could I make it so that we'd be paying a lower monthly payment after putting in 30k? Would we have to refinance?

Answer 1

You will have to refinance to get the benefit of lower payments

Answer 2

First of all why would you want to do this? If the 30K is some place drawing interest and the monthly payments are not a problem why would you do this?

Sure you can lower your monthly payments, as well as the loan amount, but what if you got the same interest rate?

Well let's do a little rithmatic. Is the 30K drawing interest and how much? Would you be able to lower your mortgage interest rate?

Now what is the difference? Are you now equity rich and money poor? Do you have enough money for any possible emergency?

If you want to payoff your mortgage over a shorter period of time simply add additional money to your monthly payments and write a note to your lender or mortgage loan servicer and tell them to add the additional amount is for principal.

I guess what I am trying to say is check with your trusted advisers, get their opinions about the situation. Speak with your lender and see if paying this amount of money would not only lower your mortgage amount, but would a refinance lower your interest rate?

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

I think the only option you would have that would facilitate this is to have an interest-only loan that re-casts every single month. Not all interest-only loans do this. Some of them keep your payment the same until the interest-only period ends, while others change the payment to reflect the current principal balance.

But remember that your interst-only rate is going to be higher than a fully amortized loan. Remember that even if your monthly payments don't go down with a fully amortized loan, you are still gaining the benefit of every bit of principal reduction that you do.