I paid some principal towards my mortgage. the bank reduced my time period not the mortgage payment. is this koshier?
Extra payments of principal are a terrific way of reducing the principal balance outstanding on your mortgage. Reduced principal not only reduces the time to pay down your mortgage, but more importantly, reduces the amount of interest that you are paying the bank.
This is certainly kosher…prepayments apply directly to reduction of principal and the expectation is that you maintain the same regular payment schedule.
You can certainly ask the bank to modify your payments if you wish, but if you can maintain your current payments, you will build equity faster.
Here is a useful site to show you how much interest you will save and how your equity will build:
http://www.banksite.com/calc/prepay
Hope that helps!
Extra principle reduces your mortgage balance. Unless you told the bank you were paying towards NEXT MONTH’S payment, they did the correct thing.
References :
yes,
I don’t know of any mortgage that would reduce the payment. They are more interested in decreasing the amount of exposure to the loan *(reduce the time period so it pays off sooner) as well as maintaining as much interest as possible. (most mortgage contracts have either a prepayment penalty or language that requires that if you are going to try to effectively reduce the amount of interest that you pay (making lump sum payments to reduce the loan significantly) that they can require a full pay off (refinancing) as they sold the debt to be able to make more mortgages after yours and the new mortgage debt holder is requiring a certain amount of interest over the life of the mortgage.
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Yes! What happens is the extra you paid on the principal
is applied to the loan itself. Therefore, the amount applied to interest will drop and the amount applied to principal will increase.
You may shave some time off the overall lengfth of the loan, but there is no obligatiobn to decrease your monthly payments.
References :
How did you tell them to apply the extra money? Did they know that it was going to principal? I pay our mortgage online and pay extra towards principal. I have noticed that our payment has gone down slightly (10 cents) but I haven’t paid any attention to the time frame. I would think that the time frame would shorten by paying extra towards the principal. It will reduce the interest.
References :
Extra payments of principal are a terrific way of reducing the principal balance outstanding on your mortgage. Reduced principal not only reduces the time to pay down your mortgage, but more importantly, reduces the amount of interest that you are paying the bank.
This is certainly kosher…prepayments apply directly to reduction of principal and the expectation is that you maintain the same regular payment schedule.
You can certainly ask the bank to modify your payments if you wish, but if you can maintain your current payments, you will build equity faster.
Here is a useful site to show you how much interest you will save and how your equity will build:
http://www.banksite.com/calc/prepay
Hope that helps!
References :