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Does bank ever negotiate mortg loans with more principle paid up front? Why pay interest first?

  • January 08 2010 - Newton
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Answers (8)

Profile picture for banker4u
You are free to pay as much principle as you want, but your interest is due on the amount currently owed until you pay back what you borrowed. But your really missing the point. Why would you want to? Your house, almost any house is a depreciating asset that continues to fall in value, so why would you take your hard earned money and invest it in the principal of a depreciating asset. Thats like picking a stock that is falling in value and investing as much money into it as you can. Why? so you can own the house? You already do. I guess you could stand on the lawn and shout out how you paid off your house. Then you could watch as your money now shrinking and trapped in a depreciating non liquid asset loses equity. Oh, and you also just lost your biggest tax writeoff. Whatever you where planning on paying into principal you should instead buy some bonds. Something safe, liquid, and growing.
  • January 23 2010
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Profile picture for SoCal Engr
Eventually,

Try what many recommend people work towards...paying themselves instead of a lender.

In your case, set up a separate bank account specifically for making payments against the principal. Then, for a period of time (say 4-6 months), make payments into this account. Since the money is still in your control, you can afford to stretch yourself (i.e., you still have access to the money if you find that you paid too much in). Over 4-6 months, you will get a feel for how much you can afford.

Then, continue making your payments into this account, but also start using this account to make the payments against the principal. If you put $200 in, then write $200 out. The general idea is, you've created a buffer in the event an emergency comes up. If you find one month that you have extra cash, put in more and build up the buffer.
  • January 08 2010
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Profile picture for eventually
If I have an "interest only" loan modification and my monthly payment goes all to intererest around how much more should I try to pay monthly.  Would $200.00 be okay?  I dont have much more.
  • January 08 2010
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Profile picture for MagicalHouse
Simple math, You borrow X at Y interest, the amount interst you pay reduces as the amount of X remaining decreases.  Y will never change (fixed rate) but the dollar amount of payment will.  Simple math people!!!!! 
  • January 08 2010
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Profile picture for SoCal Engr
Just FYI...

Same question, same OP, different thread


Thought I'd try and save the OP and everyone the hassle of dealing with two threads on same question from same person.
  • January 08 2010
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That's how they make money on lending money, otherwise there would be no incentive for them to lend money or be in business. There are alternatives though, paying cash for the property, non-institution lenders may have different terms or methods/options available. A weallthy friend/family etc. may also have different terms.
  • January 08 2010
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Never seen it done.  If I had a client ask I would say No.  Only option would be to get an interst only loan and pay as much principle as you want on a monthly basis.  The down side is you cannot get that in a 30 year fixed rate loan.
  • January 08 2010
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You can always pay a little extra and specify that amount be applied toward the principle and not the interest... Hope this helps.
  • January 08 2010
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