I have a $190000 mortage with Ohio saving bank, 7 yr ARM. I sent $10000 as principal this Jan. After 1 month, nothing happened to my monthly payment, I called in and I was told I need to fax something to adjust either monthly payment or the longth of the loan. But I was too lazy, today, after 4 months, I called and they told me that they cannot do anything after 4 month. The principal was reduced to $180000 and the monthly payment and the longth are still the same due to the ARM. Big lesson learned, please don't blame me for my idiotness.
Any suggestions what I can do to solve this problem?
How about this? I send them some money as principal and request reduction of monthly payment. I will have to pay $250 for the change, What is this called? refinancing?
u2head8 is correct. Prepaying principal will reduce the amount you pay in interest over the life of the loan but will not change your scheduled monthly payment amount. Obviously you might reduce the remaining payoff time though if you prepay enough to pay the entire loan off earlier than originally scheduled.
How about this? I send them some money as principal and request reduction of monthly payment. I will have to pay $250 for the change, What is this called? refinancing?
Thanks
It's called recasting and $250 sounds about right or lower than I have seen. It just means they reamortize your mortgage to take into account the lower principle amount. Takes them about 10 seconds to do and they make a few hundred bucks.
voovoov
Senior Member
posted: May. 9, 2007 @ 9:24a
Aurianne said: u2head8 is correct. Prepaying principal will reduce the amount you pay in interest over the life of the loan but will not change your scheduled monthly payment amount. Obviously you might reduce the remaining payoff time though if you prepay enough to pay the entire loan off earlier than originally scheduled.
Thanks for the clarification.
If the monthly payment stays the same, does this mean that the amount of interest and principal stay the same or they change accordingly?
voovoov said: Aurianne said: u2head8 is correct. Prepaying principal will reduce the amount you pay in interest over the life of the loan but will not change your scheduled monthly payment amount. Obviously you might reduce the remaining payoff time though if you prepay enough to pay the entire loan off earlier than originally scheduled.
Thanks for the clarification.
If the monthly payment stays the same, does this mean that the amount of interest and principal stay the same or they change accordingly?
Nothing changes.
lhendricks92
Senior Member - 1K
posted: May. 9, 2007 @ 9:36a
voovoov said: If the monthly payment stays the same, does this mean that the amount of interest and principal stay the same or they change accordingly?
Payment stays the same, interest decreases, principal increases.
biglittle said: voovoov said: Aurianne said: u2head8 is correct. Prepaying principal will reduce the amount you pay in interest over the life of the loan but will not change your scheduled monthly payment amount. Obviously you might reduce the remaining payoff time though if you prepay enough to pay the entire loan off earlier than originally scheduled.
Thanks for the clarification.
If the monthly payment stays the same, does this mean that the amount of interest and principal stay the same or they change accordingly?
Nothing changes.
That is not true. If you pay down the principal and maintain the same monthly payment, the amount of principal paid each month increase while the amount of the interest decreases.
It is like jumping ahead on the ammortization schedule by however much the principal is paid down.
69ragtop said: If you pay down the principal and maintain the same monthly payment, the amount of principal paid each month increase while the amount of the interest decreases.
It is like jumping ahead on the ammortization schedule by however much the principal is paid down.
Right, and the net effect is that the loan will be paid off earlier than originally scheduled (excluding effects from ARM adjustments in years 8+).
what exactly was ur intention? what did u want the outcome to be?
anyway, u said it was an ARM. don't do anything. especially don't pay $250. when the ARM resets, they will adjust ur payment accordingly.
mwarrior
Member
posted: May. 9, 2007 @ 10:42a
voovoov said: The principal was reduced to $180000 and the monthly payment and the longth are still the same due to the ARM.
I think thats the part everybody seems to have missed. YES the payment will be the same (as stated in above threads). However, the length will not be the same because you are now paying less interest and the same monthly payment (so less interest paid, more principal paid off).
What you're doing is paying your loan off quicker. If you were going to originally pay it off in 15years, and now you're paying less interest, when the principal is paid in say 14years (just a random number), they cant say "well you still owe us a year's worth of payments even though you just paid the loan off".
So my suggestion? Keep the same payment if you can afford it, and on ocassion make larger payments to principal. The loan will be paid earlier either way.
ChemEngGuy
Addicted Member
posted: May. 9, 2007 @ 10:50a
Ummm... You were lazy for 4 months to the extent that you couldnt be bothered to make a phone call???
I wanted to ask the "How is it possible to have a $200k mortgage and not know how it works???" question, but figured if you couldnt be bothered to make a phone call then you probably wouldnt bother with reading all those fancy words on the papers you were signing.
xpguy
Senior Member - 3K
posted: May. 9, 2007 @ 10:51a
voovoov said: Big lesson learned, please don't blame me for my idiotness You sign on a loan that you don't understand? No one else to blame but yourself
Don't forget to note that the extra amount you are paying is to be applied to the principle and is not a prepayment of monthly payments. Interest is based on the remaining principle. As that goes down so does your remaining balance and length of expected payoff.
lhendricks92
Senior Member - 1K
posted: May. 9, 2007 @ 2:20p
let's all agree in principle that mortgage principal is spelled with an "a."
sorry to be a douche, but the error happened about 20 times in this thread.
macdave said: When you get to the next adjustment (usually 6 months), your payment will go down and the term will stay the same.You know that without even reading the OP's loan documents? Amazing...
dcwilbur said: macdave said: When you get to the next adjustment (usually 6 months), your payment will go down and the term will stay the same.You know that without even reading the OP's loan documents? Amazing...
It is pretty standard. Each adjustment, (usually every 6 months)they will figure your payments based on the new rate, remaining principal and number of payments left. So if you make additional principal payments the term stays the same with an ARM.
macdave said: It is pretty standard. Each adjustment, (usually every 6 months)they will figure your payments based on the new rate, remaining principal and number of payments left. So if you make additional principal payments the term stays the same with an ARM.My point is that rules of thumb or what usually happens or what is "pretty standard" has no bearing at all. Many (most? almost all?) people enter into the largest transaction of their lives without reading the documents, understanding the transaction or asking the right questions and operate on basic assumptions which may or not be correct in their case. Read the terms, folks.
xpaphil said: Don't forget to note that the extra amount you are paying is to be applied to the principle and is not a prepayment of monthly payments. Interest is based on the remaining principle. As that goes down so does your remaining balance and length of expected payoff.Maybe someone can correct me if I'm wrong, but since you can't even spell principal correctly, I'm going to have to think you may not know as much about mortgages as you think you do. If I have a $1,000/month mortgage payment and I send in $10,000 and they were to credit that as 10 months of payments, the account would be credited for the principal + interest payment for the next payment due, then 9 more monthly payments that would be 100% principal payments, and the subsequent payments would reflect the lower principal amount. How would that be a bad thing? Seems to me it would be very useful to be 9 or 10 months ahead on a mortgage payment in case something unexpected comes along.
Beckles said: xpaphil said: Don't forget to note that the extra amount you are paying is to be applied to the principle and is not a prepayment of monthly payments. Interest is based on the remaining principle. As that goes down so does your remaining balance and length of expected payoff.Maybe someone can correct me if I'm wrong, but since you can't even spell principal correctly, I'm going to have to think you may not know as much about mortgages as you think you do. If I have a $1,000/month mortgage payment and I send in $10,000 and they were to credit that as 10 months of payments, the account would be credited for the principal + interest payment for the next payment due, then 9 more monthly payments that would be 100% principal payments, and the subsequent payments would reflect the lower principal amount. How would that be a bad thing? Seems to me it would be very useful to be 9 or 10 months ahead on a mortgage payment in case something unexpected comes along.To follow up my own post, I guess there could be a problem with the silly way mortgage payments are calculated based on one month of interest no matter what. It's a mystery to me why mortgage loans use that simplification instead of the more logical method of daily interest charges like most car loans or even home equity loans.
.Beckles said: Maybe someone can correct me if I'm wrong, but since you can't even spell principal correctly, I'm going to have to think you may not know as much about mortgages as you think you do. If I have a $1,000/month mortgage payment and I send in $10,000 and they were to credit that as 10 months of payments, the account would be credited for the principal + interest payment for the next payment due, then 9 more monthly payments that would be 100% principal payments, and the subsequent payments would reflect the lower principal amount. How would that be a bad thing? Seems to me it would be very useful to be 9 or 10 months ahead on a mortgage payment in case something unexpected comes along.Sorry, but you are mistaken.
IF the mortgage company credits the extra $10,000 as principal, then that would not relieve you of the obligation to make regular scheduled payments going forward. You will not be "9 or 10 months ahead...in case something unexpected comes along."
IF the mortgage company just credits you with having made ten payments in advance, then they aren't going to adjust your amortization accordingly and you will have accomplished nothing by making say, January through October payments all in January.
Beckles said: xpaphil said: Don't forget to note that the extra amount you are paying is to be applied to the principle and is not a prepayment of monthly payments. Interest is based on the remaining principle. As that goes down so does your remaining balance and length of expected payoff.Maybe someone can correct me if I'm wrong, but since you can't even spell principal correctly, I'm going to have to think you may not know as much about mortgages as you think you do. If I have a $1,000/month mortgage payment and I send in $10,000 and they were to credit that as 10 months of payments, the account would be credited for the principal + interest payment for the next payment due, then 9 more monthly payments that would be 100% principal payments, and the subsequent payments would reflect the lower principal amount. How would that be a bad thing? Seems to me it would be very useful to be 9 or 10 months ahead on a mortgage payment in case something unexpected comes along.Maybe because, spelling a word correctly or not has "no" bearing on the correctness of the information.
If you send an amount equal to 10 monthly payments, they will pay the interest portion for that month and then apply the entire remainder to the principal. This will cause each subsequent payment to have a smaller interest portion than the standard amortization and a larger principal portion. This will result in the mortgage being paid off quicker with less interest changes.
However, your payment "will' still be due for the subsequent months, and will be late if you don't make it.
dcwilbur said: .Beckles said: Maybe someone can correct me if I'm wrong, but since you can't even spell principal correctly, I'm going to have to think you may not know as much about mortgages as you think you do. If I have a $1,000/month mortgage payment and I send in $10,000 and they were to credit that as 10 months of payments, the account would be credited for the principal + interest payment for the next payment due, then 9 more monthly payments that would be 100% principal payments, and the subsequent payments would reflect the lower principal amount. How would that be a bad thing? Seems to me it would be very useful to be 9 or 10 months ahead on a mortgage payment in case something unexpected comes along.Sorry, but you are mistaken.
IF the mortgage company credits the extra $10,000 as principal, then that would not relieve you of the obligation to make regular scheduled payments going forward. You will not be "9 or 10 months ahead...in case something unexpected comes along."
IF the mortgage company just credits you with having made ten payments in advance, then they aren't going to adjust your amortization accordingly and you will have accomplished nothing by making say, January through October payments all in January.
Here we go again...Don't pay extraAs I said in my follow up post, it's because of the silly way mortgages calculate interest based on one month instead of actual daily balance like most other loan products.
btuttle said: Beckles said: xpaphil said: Don't forget to note that the extra amount you are paying is to be applied to the principle and is not a prepayment of monthly payments. Interest is based on the remaining principle. As that goes down so does your remaining balance and length of expected payoff.Maybe someone can correct me if I'm wrong, but since you can't even spell principal correctly, I'm going to have to think you may not know as much about mortgages as you think you do. If I have a $1,000/month mortgage payment and I send in $10,000 and they were to credit that as 10 months of payments, the account would be credited for the principal + interest payment for the next payment due, then 9 more monthly payments that would be 100% principal payments, and the subsequent payments would reflect the lower principal amount. How would that be a bad thing? Seems to me it would be very useful to be 9 or 10 months ahead on a mortgage payment in case something unexpected comes along.Maybe because, spelling a word correctly or not has "no" bearing on the correctness of the information.
If you send an amount equal to 10 monthly payments, they will pay the interest portion for that month and then apply the entire remainder to the principal. This will cause each subsequent payment to have a smaller interest portion than the standard amortization and a larger principal portion. This will result in the mortgage being paid off quicker with less interest changes.
However, your payment "will' still be due for the subsequent months, and will be late if you don't make it.I was only responding to someone who said that it could be credited as ten payments. I would agree that most banks would not credit such a payment to any loan in such a way and would do exactly as you said, credit it as a principal payment, I was only speaking on the alternate scenario offered by another poster.
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