We have been making payments on our mortgage for 8 years on our home wthout so much as a dent in the principle balance. I have spoken with my mortgage company and they justified this by telling me that I am accruing $11.50 a day in interest.
My family has been in economic hardship for a number of years and we have been trying to stay afloat. Our credit is damaged and we feel hopeless. We have also been trying to sell, and our home along with 200 other homes in our community are not selling. What are our options? How can we change the amount of interest accruing so we can survive?
David Reed is WalletPop's Mortgage Expert
When you borrow money, you also pay interest on that money. That's why lenders exist, to make money by lending money. Free money and there wouldn't be any lenders anywhere.
Fully amortizing loans, loans that are paid off at a set period of time, say 15 years or 30 years, have the bulk of the interest in the note paid up front, typically the first 20 years. Each month when you make a payment, you pay a little on your loan balance (principal) and lots of interest. As your loan approaches maturity, your payment will still be the same but more will go to your principal balance and less to interest.
I was hoping for some options and guidance, not an obvious answer. We borrowed 40,000 8 years ago and have made 32,000 in payments and our current principle balance is 38,500. We've only moved it 1500. That makes no sense. We want to have better options, but our credit is poor. Where do people go when they need help?
Tracy L. Coenen is WalletPop's Tax Expert and Fraud Expert
With poor credit, I'm afraid there aren't a lot of options. You can look into refinancing for a better interest rate, but it doesn't sound like getting refinanced is much of an option based upon your credit and the real estate market in your community.
Can you pay extra each month toward the principal? If you can't refinance, this is the best way to reduce the interest you are paying. The faster you chip into that principal, the lower your monthly interest will be, so more of your regular payment will be going to principal instead of interest.
Some other questions. What is the "quoted" interest rate on the loan? Is it a fixed or variable rate loan? After making payments for 8 years and only reducing the principle by $1,500, something doesn't sound right (obviously!).
If you give me the information I requested above, I can whip up a quick amortization schedule in Excel to show you where your principle SHOULD be given those known factors.Provide the following just be sure: original principal amount (total amount borrowed at the time of the loan) EDIT: $40,000, interest rate, time period (e.g, 15 year loan, 30 year loan). I will assume that you are making monthly payments since this is a mortgage.
ADDITIONAL INFOYour payment is comprised of principal and interest as well as escrowed taxes and insurance (if required). Also, it may include PMI (Private Mortgage Insurance) if you didn't have a down payment equal to 20% of the principal at the time the loan was taken out. All the other stuff aside, the interest portion of your payment decreases immediately with the second payment and the amount of principal reduction per payment increases. This is hard to notice because it's relatively small at first (especially with a 30 year mortgage with a total of 360 payments!).
As Tracy stated, your interest costs are a function of your principal balance. If you get that principal down, your interest costs (both per payment and in total) will go down as well. For the payment, this is good because you reduce your principal payment even further with each additional payment.
For my mortgage, I pay biweekly. This gives me a "13 payments per year" effect with the last (13th) payment being applied to principal. Also, I pay extra each month on the principal as well. I made sure that my loan included the "pay off early without penalty" provision. With that being the case, I'm hoping to have my 30-year loan paid in about half that time!
Remember ,you have the money ! they can't make it without you . So contact them now and make them a real offer you can live with and tell them they can forclose on the house and let the cards fall where they will if they don't want to work with . That fear of looseing the home is the the one thing they have over you ,but don't let it overcome you.
Now get all your outstanding creit cards and find a debt collector, not a (not-for profit ) one the just work aginst you. A good company will mediate and arbitrate your debt by half or more. I have used one company and got as low as 35% pay off I saved 65% .
But you must stick to the plan. I also cut down on other items like buying things i really did't need , starbucks, b uying meats at discounts , the day before the resale date comes, less eatting out movies etc. there is a way out .
Now offer your mortgage company a monthly payment plan you can keep for the next 6 mos. Yes you'll get late payment charges , so what in the long run it really woun't mean much if it takes care of you now.
I've done the above and have 2 house payments , which are on the market , they will sell, and this is the best time for homeowners who want to redo there loans.the gov. will now help you but you must help yourslef first. Take control of your money and stay on target.
I have a solution to your problem. I have a program that will help you payoff your mortgage without refinancing and not increase your monthly payment and change to your monthly budget. This is not a scam. Please visit www.u1stfinancial.net/stevesilva. Watch money merge account overview. I can be reached at silva0703@aol.com with any questions. Thank you.
Champions Realty® is a FULL SERVICE Real Estate Company. NOT a DISCOUNT or Limited Service Brokerage.
Also, if you pay your bill 2x a month you would pay off a 30-year note in around 24 years. (Ex... your note is $1000, you sign up with the lender to auto-debit. You pay $500 on the 1st and auto-debit the other $500 on the 15th. This also works if you pay an extra payment a year. That's the power of compound interest. http://RussellThomae.com
United First Financial, which silva0703 is advertising, is not the answer. They will charge you $3,500 for software which basically tells you to take extra money each month and pay it on your mortgage. You can do that FOR FREE and without the software.
Don't fall for their claims about a fancy algorithm and other confusing explanations. The program simply works based upon you paying more than your minimum mortgage payment each month.
More about why you should avoid UFF here:
http://www.sequence-inc.com/fraudfiles/2008/05/16/what-does-dave-ramsey-think-about-united-first-financial/
Agreed about United First Financial. You can take the money you would pay for the software and apply it to your loan's principal balance! This is a typical situation of a "business" preying on those in dire need.
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