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?
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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.
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?
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+).
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.
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.
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.
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