interest loan + principal?
Tuesday, 17. August 2010
So i have a house out in So. California. Purchased for 430K…. refinanced twice..becuase I was suckered in and didnt know the real estate game…. now my bill is @ nearly 510K…. my loan bill has been adjusted for 30 years @ 1,700/per month. ….interesting only?
I still have equity in the house, but im afraid of a market fall….What would happen then? Can i re-structure my payments or loans to send more money to the principal without refinancing? please help…
Do I have to send a minimum payment to the principal, after paying my interest only loan? or can i send a "whatever I can" amount?
Mr. Knowitall Says:
Not sure exactly what type of loan you’re referring to – a pay option ARM (several payment options monthly) or an interest-only loan (only required to pay interest every month).
If it’s interest-only, you must pay at least the interest every month, and any amount that you pay over that goes to principal. As long as you pay on the principal every month, your loan balance will decrease. You can usually make principal payments without incurring a penalty – check your loan documents to be certain. Generally, penalties are only assessed if you make large lump sum payments.
If you have a pay option ARM and you only make the "minimum" required payment, your loan balance will increase (this is called negative amortization). You must either pay the full interest-only payment, or the principal and interest payment in order for your balance to stay the same or decrease.
If you have an interest-only loan on a fixed rate, I recommend that you stay put. If you have a pay option ARM, you may want to consider refinancing to a fixed rate, depending on what your current interest rate is.
Not everyone charges ridiculous closing costs – be selective and search for a good deal.
Jamie F Says:
You should be able to find out what your options are by either checking your loan documents, or calling your mortgage provider. Whover you dealt with shoudl be able to answer your question.
In Canada there can be a penalty of 3 months interest when pre-paying lump sums on the principle, or, depending on the mortgage, you can pay down a certain percentage in a calender year without penalty.
Breezy365 Says:
You need to check with your loan company first to see if you can make pre-payments without a penalty. "IF" I was you, I would get out of that interest only loan though. If the market falls, you haven’t paid down your principal at all. If you don’t want to refinance again, talk to your lender and absolutely make "principal only" payments if you can, and even if you have a prepayment penalty, you still should be able to pay on the principal up to a certain amount.
P.S. I’ve been in the mortgage business for 20 years.
Ken 22 Says:
Here’s the deal….you got suckered, ok. Now you want to stay put unless a much better situation arises. pay your interest only payment plus a little more to hedge against the lack to your principal…Or do this: Take you IO payment add a few hundred dollars to it and split it into 2 payments per month, this wiil work any questions you can e-mail me Ken.lifemortgage@gmail.com