Most of the things in life we pay for more with our hard earned money goes toward the principle except the house payment. Please someone explain why. Thanks in advance and have a great new year.
2007-12-24 21:12:06 · 12 answers · asked by Anthony D F 1 in Business & Finance ➔ Renting & Real Estate
can't do one without the other. reverse your mortgage and you no longer own the house.
pay extra principal and your payments will have less going to the interest side.
to replay to your last query, it's the price you pay to borrow a large sum of money. if you had 100k, you would not have to borrow so much or any and would save on interest.
2007-12-24 21:16:11 · answer #1 · answered by Anonymous · 1⤊ 1⤋
You can't. The interest portion of any payment depends upon what the current outstanding balance of your mortgage is. What you CAN do however is include extra money with your payment.
If you do that, enclose a note explaining that you want the additional money applied against the principal. If you fail to enclose that note, many if not most lenders will just dump the excess into your impound account were it won't do you any good at all.
2007-12-25 06:47:53 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 1⤋
you may pay up to 20% of your principle balance each year without a prepay penalty. Make a principle payment 100% of the time, that's the best answer
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2007-12-26 21:13:55 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Don't buy a house you can't afford.
Secondly, the only way to get more going to your principal is to pay more each month, or refinance at a better rate. If you can't refinance at a better rate (only use a real bank, not some internet scam artists) then you have to do your best to make larger payments. Sell the extra car, sell the RV and save money any other way to have financial security before you are too old).
2007-12-25 05:15:44 · answer #4 · answered by Anonymous · 0⤊ 1⤋
It has to do with the ammortization schedule that is set up over a 30-year period (if you have a 30-year mortgage).
If you looked at a15-year ammortization schedule, you would see substantially more going to principle than interest.
Every ammortization schedule has a "break even" point, where more goes to the principle than interest. In a 30-year mortgage, it happens around year 15 to 17...in a 15-year mortgage, it happens around year 4 or 5.
The reason why, is that the bank is fronting you a huge chunk of money up front, and this is a way for them to recover the costs and THEIR loss of interest (because banks make money on their own assets as well), because they have given this money to you.
The only way that you can get ahead is anytime you have extra money, put it toward the principle. You used to have to write a separate check for that, but now there are laws that are incorporated into RESPA, that if there are no outstanding late fees or other unpaid charges, any extra a mortgage company recevies MUST go toward the principle.
Just paying $5.00 extra per month toward principle on a 30 year $100,000 mortgage will save you $27,000 in interest, and take 4 YEARS (or better) off your payments....you see how quickly that adds up?
2007-12-25 05:38:16 · answer #5 · answered by Expert8675309 7 · 0⤊ 5⤋
Pay the mortgage down faster. The reason most of your payment goes to interest is your loan balance is large at the beginning of the loan. If you pay extra each time, any extra you pay will go into reducing your principal. The best time to do that is at the beginning of the loan.
DK
2007-12-25 05:16:18 · answer #6 · answered by dooberheim 6 · 2⤊ 1⤋
That is the way a long term loan is amortized. The lender pays to himself mostly interest in the beginning, as it SHOULD be, since at the beginning of the loan you have the lion's share of the money. As your principal reduces, so does your interest.
Sorry, but there's no way you're going to change that.
2007-12-25 08:34:07 · answer #7 · answered by acermill 7 · 0⤊ 0⤋
You cant. You can pay extra on your principle. That interest is what you pay for it to be worth the bank lending you the money for your house. To reduce that amount. Pay extra every month on the account. Put for principle only.
2007-12-25 07:59:16 · answer #8 · answered by Bob D 6 · 0⤊ 0⤋
Thats the way a declining-balance loan works. The greater the balance remaining, the larger percentage of your payment that has to go toward interest on that balance. You can't "reverse" it.
2007-12-25 09:52:56 · answer #9 · answered by npk 7 · 0⤊ 0⤋
Most of use buy pretty much as much as we can afford and do not have more to put against our principle. However, your bank should allow you to pay an additional amount each month that goes 100% against your principle.
2007-12-25 15:51:19 · answer #10 · answered by Landlord 7 · 4⤊ 0⤋