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Replies (6)
- Alan May
- Contributions:4377
very doubtful that they would allow that. The purpose of the interest-up front is to pay the bank for the use of their money. I doubt they'd be willing to forego that right.
There are many programs that allow lower payments up front with increasing payments as you go down the road... check into those.
There are many programs that allow lower payments up front with increasing payments as you go down the road... check into those.
- Nancy Brooks-Haslam, "ROBINS AFB GEORGIA"
- Contributions:219
There are several good online mortgage calculators to check out different scenarios. Also, if you pay at least one extra payment per year and have it applied directly to principal it will reduce a 30-year loan to approximately 25 or less. Of course, you can always go a 15-year amortization which greatly reduces the interest thus also increasing equity faster!
- sureel78
- Contributions:5
Thank you all for the good responses/opinions.
- frank1003
- Contributions:266
To set the record straight, Principle is a noun. Principal is both an adjective and a noun. As a noun, Principal is defined as "a capital sum." Therefore, Principle is not the proper spelling when used in financial terms. Principal is.
As for sureel78's question, I'm unaware of any program that is available to accomplish your goal by way of manipulating the amortization schedule. However, what you may want to do is apply for a shorter-term loan, say 20 or 25 years instead of 30. The payment would be a bit higher, but more of the monthly payment will be allocated to principal. Or, you can accomplish this yourself on a 30 year loan by either dividing the monthly P&I payment by 12 and adding the result to your regular monthly payment each month, or simply make an extra payment (or two if you so desire) each year.
As for sureel78's question, I'm unaware of any program that is available to accomplish your goal by way of manipulating the amortization schedule. However, what you may want to do is apply for a shorter-term loan, say 20 or 25 years instead of 30. The payment would be a bit higher, but more of the monthly payment will be allocated to principal. Or, you can accomplish this yourself on a 30 year loan by either dividing the monthly P&I payment by 12 and adding the result to your regular monthly payment each month, or simply make an extra payment (or two if you so desire) each year.
- frank1003
- Contributions:266
sureel78, you do need to consider, as stated above by kirkwilliamsgroup, that paying extra principal is not always a wise idea. For instance, if you know you're going to stay in the home forever, I'd suggest paying the mortgage off as quickly as possible. However, if you're only going to be in the home short-term, you'd do much better making an interest-only payment on the mortgage and investing the additional cash in a safe, high yielding investment vehicle. This applies right now because values in many areas are deflating. If you pay down an additional $5,000, but your value declines $5,000, you've essentially lost the $5,000, whereas if it were in the bank you'd still have it. When today's market trend changes and it becomes more of a sure bet that the home will appreciate in value, then it would make sense to use the funds you've put aside in the bank to make a lump sum principal payment. Make sure you don't get a mortgage with a pre-payment penalty or doing this may not be permitted. Some prepay penalties allow for a principal reduction as long as it's less than a specified amount or less than a a specified percentage of the outstanding balance. Others may not allow principal reductions at all. You'll have to read the fine print if it is your intention to accelerate the repayment.
- Dave Mason, "DebtFreeDave"
- Contributions:1315
First timer!
I am a first time home buyer.
Is it possible to negotiate with the bank on the basis of Amortization schedule. What I mean is that for eg. if I am going for a 30 yr loan can I ask the bank to go with a fixed principle and interest and pay a bulk at the end of the loan?
The reason I am asking is that I know that I wont be staying in the house for more than 6-7 yrs so I need to pay more towards principle and less towards interest to build a decent equity.
Let me know if anybody have had an experience negotiating on the basis of Amortization calculations.
Thanks !!
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