what do you think about simple interest mortgages?? I have a primerica smart loan and am paying alot of interest, but paying off $1200 principle on my house monthly. I should have my house paid off in about 15 years.. I am wondering about keeping up with this high payment and wonder if there are other options that would be more suitable. I do like the idea of paying off the house soon..what is your opinion on this??
Well you really have two options- an ARM (Adjustable Rate Mortgage) or a Simple Interest Mortgage. With the ARM you are going to get a 'lower' (aka 'for now') interest rate now, but will have to re-finance every 3, 4 or 5 years. To me that's risky as you don't know what the next interest rate will be, and if you can't afford it- your only option is to extend the term of your mortgage (hence why a 20-year mortgage is really '20-ish' if you read the fine print in an ARM mortgage). At least with SMART you know what your worst rate will be (the one you pay if you only make the min. monthly payments which draw you out to the end of the stated term), and of course there is your ACTUAL interest rate.
Look at your proposal. Bottom right corner- what's the total interest you're going to pay? Divide that by your loan amount (upper left). Divide that number by the number of years to pay off your mortgage at the accelerated payment plan you chose. Multiple it by 100... that's how much ACTUAL interest you will pay.
Example. $156,000 in total interest paid, divided by $250,000 loan = 0.62
0.62 / length (12 years, 3 months so 12.25) = 0.05
0.05 x 100 = 5.0 <-- Actual Interest Rate (insert "Sweeeet" here)
NOW. How often can you add to the principle on an ARM? Usually annually, on the anniversary (no other time without penalty). How much? Usually 10% max. How many people TAKE ADVANTAGE... Um, not very many!!! How fast will you get that mortgage paid off? You can't figure it out because everything is unfixed- interest rate, term, will you be able to add to the principle...
Now, if you are finding your payments high... call your rep. Can't find your rep? Call Citigroup Home Mortgage directly. Give them your reference number. The company is great- they can let you know your options for changing the terms, etc. They always do their best to help!
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