I have a question for bankers or financial people. How much interest should I be paying with this payment?
Saturday, 7. August 2010
I have a home equity loan with an interest rate of 7.49% (fixed). The monthly payment is 9.78. Of that 0.29 goes to interest, 3.13 goes towards the principal, and .36 goes to insurance. My question is: Is the interest they’re charging me every month correct. Sure seems like alot to me, but I’m no money man. The people at the bank don’t seem to be able to explain it to me so I figured I’d ask the question here. Second question: I know interest rates are falling. Would it be wise to refinance this loan at a lower rate? Is now a good time or are rates going to drop more. Or should I just leave it as it is. Thanks alot for any help.
kim h Says:
When you borrow money and have an interest rate that is not the amount that you pay every month. The majority of the payment goes to interest when you first get a loan. As the balance goes down the interest payment will also and then the principal will go down faster. If you can get an interest rate of 6.5 or lower I would refinance. If it is any higher I would not. You might have to have to pay closing costs and all of that again so I would look for a place that will wave them. When you refinance you will go back to paying almost all of your payment to interest again. If you can I would send extra money every month on the principal. You swill need to specify that is where you want the money to go. Some banks make you do this and some do not so I would just do it each time.
Hannah Says:
i think you should try to refinance at a lower rate cause $290 seems way more than 7.49 percent to me out of $519
Frank R Says:
How much is the outstanding balance of the loan. I defy anyone here to answer this question without knowing this very basic fact. $520 per month suggests that you have a very, very high HEL so I understand why you don’t want to publish that info.
rtfm Says:
Is it a five-year loan? Ten? Twenty?
We don’t have the slightest hint as to whether your payment schedule is accurate or not without knowing either how much the loan is for, or how long you have to pay it back, or ideally *both* of those pieces of information.
btw, 7.49 percent is a *really* high interest rate for a home equity line. Yes, I’d suggest refinancing if at all possible.
Etta P Says:
Well a refinance will be costly with appraisal, title work, and other similar costs related to a refinance. And since fixed rates for 30yr is about 6% (give or take), your not saving the reccomended 2%. Try using http://www.bankrate.com and play around with your payment. Mortgage loans are typically simple interest, so your paying interest in arrears, paying May 1st payment pays Aprils interest. So paying $100. more and 10days early every will save you thousands and naturally reduce the term of your loan without refinancing. The total of payments on the Truth In Lending form you signed at closing shows you what you will pay if you make every payment exactly on the due date, never paying any more than that amount. Each time you pay more, the next payment will have less interest taken out than if you the regular payment would.
Just food for thought! Hope it helps
beatle_george1964 Says:
I’m not a banker, but homeowning I know about.
Interest always seems to be higher than the principle. It is my personal opinion that this is how they make their money. However, if I were you, I would go back to that bank and refuse to leave until somebody explained to me in simple English why this is correct. They could do THAT much. You’re a customer and they need to MAKE the time for you.
Now- once you’ve resolved that situation to your satifaction, my opinion on your second question is this:
The way the housing market is going right now (and depending on what they tell you at the bank), I’d sit tight. Don’t fool around and lose your "fixed-rate" status. Baring the bank is robbing you, you are sitting in the catbird seat, and are one of the lucky ones. You have good rates, and there’s nothing they can do about it!! I’d wait until the dust settles, then start shopping around to see what I could do to interchange that interest and that principle: you know, I’m sure, that you’d want the principle to be the higher of the two, because that’s what’s actually paying your house off.
hope this helps