Comments on: My Mortgage Payment Dropped $150 Per Month http://cashmoneylife.com/mortgage-payments-adjust-change/ Money Management, Small Business, Career Thu, 09 Feb 2012 19:08:34 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Donald http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-45480 Donald Sun, 05 Feb 2012 16:24:37 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-45480 We refinanced our mortgage last year and just realized, thanks to a 1099 form, that our bank is paying us 2% on our escrow account. This is apparently mandated by a New York State law enacted years ago when 2% was considered the bare minimum rate. (I am embarrassed that I had not read the mortgage agreement carefully enough to have been aware of this beforehand, and this increases my degree of sympathy for the many people who have been surprised by unpleasant details of their sub-prime or adjustable rate mortgages.) Anyway, I would like to know if there is any means of taking greater advantage of this 2% rate. For one thing I think I should start sending my monthly payment in earlier rather than later in the month. Is it also possible to send in extra funds to the escrow account in order to earn even more? Will the bank refund the excess annually, right away or just apply it to the principal? I suppose I won't really know until I try it! We refinanced our mortgage last year and just realized, thanks to a 1099 form, that our bank is paying us 2% on our escrow account. This is apparently mandated by a New York State law enacted years ago when 2% was considered the bare minimum rate. (I am embarrassed that I had not read the mortgage agreement carefully enough to have been aware of this beforehand, and this increases my degree of sympathy for the many people who have been surprised by unpleasant details of their sub-prime or adjustable rate mortgages.) Anyway, I would like to know if there is any means of taking greater advantage of this 2% rate. For one thing I think I should start sending my monthly payment in earlier rather than later in the month. Is it also possible to send in extra funds to the escrow account in order to earn even more? Will the bank refund the excess annually, right away or just apply it to the principal? I suppose I won’t really know until I try it!

]]> By: Ryan http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-6470 Ryan Tue, 18 Mar 2008 11:04:12 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-6470 Hello LDG, When you have a fixed rate mortgage (or any fixed rate loan), the principle vs. interest generally changes a slight amount every month. The reason is that as you pay down your mortgage, the principle (the amount you owe the bank) decreases. Then every month you make a payment, you are paying interest on less principle. The lower you pay your mortgage, the amount that goes toward your principle every month increases and you pay less interest. Increasing your mortgage payment by even $50/mo. can dramatically reduce the length of your mortgage because the extra funds go directly to the principle, again, lowering the amount of interest you are paying. Hello LDG,

When you have a fixed rate mortgage (or any fixed rate loan), the principle vs. interest generally changes a slight amount every month. The reason is that as you pay down your mortgage, the principle (the amount you owe the bank) decreases. Then every month you make a payment, you are paying interest on less principle.

The lower you pay your mortgage, the amount that goes toward your principle every month increases and you pay less interest. Increasing your mortgage payment by even $50/mo. can dramatically reduce the length of your mortgage because the extra funds go directly to the principle, again, lowering the amount of interest you are paying.

]]> By: LDG http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-6401 LDG Fri, 14 Mar 2008 21:52:37 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-6401 Thought this might be a good place to ask--- my bill doesn't change- but the amount that is principle vs interest seems to fluctuate. should it? and what is changing month to month. It is a fixed rate loan that goes to adjustable after 5 years (plan to sell or refinance before then). any info is great- thanks Thought this might be a good place to ask— my bill doesn’t change- but the amount that is principle vs interest seems to fluctuate. should it? and what is changing month to month. It is a fixed rate loan that goes to adjustable after 5 years (plan to sell or refinance before then).

any info is great-
thanks

]]> By: Mark Framness http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-4890 Mark Framness Wed, 30 Jan 2008 03:26:36 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-4890 That was the track we are probably going to take, get into a 30 year loan. After all, for most conventional loans minimum payments are just that minimums -- there is nothing holding one back from paying extra. That was the track we are probably going to take, get into a 30 year loan. After all, for most conventional loans minimum payments are just that minimums — there is nothing holding one back from paying extra.

]]> By: Mark Framness http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-4879 Mark Framness Wed, 30 Jan 2008 02:11:11 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-4879 Luck You, Since the wife and I have been paying prop taxes our escrow obligation has gone up & up. The first year they underestimated somewhat so not only did we have to pay more to cover the larger than expected tax bill but then we had to cover the shortfall. Then the town comes & reappraises our lot from farmland to residential. WHHHOOOOOAAAAAA, we really got hit on that one. This year, taxes comes out of our pocket as our escrow balance was refunded to us when we closed on the construction loan (I deliver that check in a couple of days). Hehehehe, I am not looking forward to next year's tax bill. Thank the Lord for falling 30 year rates, heck it is even tempting to jump into a 15 year loan. Luck You,

Since the wife and I have been paying prop taxes our escrow obligation has gone up & up.

The first year they underestimated somewhat so not only did we have to pay more to cover the larger than expected tax bill but then we had to cover the shortfall.

Then the town comes & reappraises our lot from farmland to residential. WHHHOOOOOAAAAAA, we really got hit on that one. This year, taxes comes out of our pocket as our escrow balance was refunded to us when we closed on the construction loan (I deliver that check in a couple of days).

Hehehehe, I am not looking forward to next year’s tax bill. Thank the Lord for falling 30 year rates, heck it is even tempting to jump into a 15 year loan.

]]> By: Ryan http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-4884 Ryan Wed, 30 Jan 2008 01:33:05 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-4884 Mark - those tax assessments can be tricky. There is no way to plan for the county changing your home's classification. I hope it works out a little better next time! I agree, current rates are nice. If you aren't sure you can afford the 15 year mortgage, you can always go with the 30, and pay extra. You may have a slightly higher interest rate, but you will still pay the loan off sooner. :) Mark – those tax assessments can be tricky. There is no way to plan for the county changing your home’s classification. I hope it works out a little better next time!

I agree, current rates are nice. If you aren’t sure you can afford the 15 year mortgage, you can always go with the 30, and pay extra. You may have a slightly higher interest rate, but you will still pay the loan off sooner. :)

]]> By: Ryan http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-4876 Ryan Tue, 29 Jan 2008 21:45:49 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-4876 Frugal Dad, I like the idea of throwing an extra $1800 per year at our mortgage also. I always round up to the next $50 mark anyway, so that is just adds to it. :) Frugal Dad, I like the idea of throwing an extra $1800 per year at our mortgage also. I always round up to the next $50 mark anyway, so that is just adds to it. :)

]]> By: Ryan http://cashmoneylife.com/mortgage-payments-adjust-change/#comment-4875 Ryan Tue, 29 Jan 2008 21:44:41 +0000 http://cashmoneylife.com/2008/01/29/mortgage-payments-adjust-change/#comment-4875 PT, your way is the only way I know to maintain a stable mortgage payment, but it doesn't change the fact that your property taxes and insurance premiums can still change. So the question really comes down to whether it is worth the hassle of dealing with your own bills in exchange for a little earned interest and fewer fees (if your mortgage agreement will allow you to manage your own; some will not), or just pay the escrow fees and be done with it. Thanks for the comment. :) PT, your way is the only way I know to maintain a stable mortgage payment, but it doesn’t change the fact that your property taxes and insurance premiums can still change. So the question really comes down to whether it is worth the hassle of dealing with your own bills in exchange for a little earned interest and fewer fees (if your mortgage agreement will allow you to manage your own; some will not), or just pay the escrow fees and be done with it.

Thanks for the comment. :)

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