I should already know where to find this, but...

[Chicky2]

Ok, so dh I and were talking about our retirement plan, which, even though some wouldn't agree, is to have our house paid off and as much in our IRA as possible. The house being paid off is most important to us. My dh has a steady gig (sidejob) one day a month and is paid a bit over $300. After the holidays, we'd like to start throwing that at our mortgage principal, plus possibly and extra $100-200 each month.

Our mortgage is $1246.31/month. The unpaid principal balance is $124,345.70.. The interest rate is 6.5%. How do I figure out how fast the extra $400 or so a month will pay off our loan?

My dh is 41 tomorrow, btw, if that makes any difference. I would love to have the house paid off in the next 15 yrs (we've been paying for almost 6 yrs already, and it's a 30 yr mortgage.)

TIA!!

[sunflower.mama]

Any chance you'd consider refinancing? We were just offered 5% on a no points no closing costs loan today (by our broker - he specializes in no closing costs loans). That would bring your payment to 667 a month on a 30 year note, or 983 on a 15 year. You'd be paid off by 2017 if you did this with the 15 year.

[Captain_Crunch]

Bankrate has a calculator that will figure that for you..

http://www.bankrate.com/calculators/...alculator.aspx

[Chicky2]

Originally Posted by sunflower.mama

Any chance you'd consider refinancing? We were just offered 5% on a no points no closing costs loan today (by our broker - he specializes in no closing costs loans). That would bring your payment to 667 a month on a 30 year note, or 983 on a 15 year. You'd be paid off by 2017 if you did this with the 15 year.

Wondering what all is involved in refi? Also, would we even be able to refi if we've been consistently late on our monthly payment for the last 3 yrs? Being honest...We've always paid it, just often slightly after the late date. (and yes, I realize how much we've paid in late payments). We're just now way more financially stable than ever, and want to really work on snowballing this and student loan (which we'll snowball first, and hopefully pay off by the end of this year!). We won't count the extra $ as income, just automatically pay it to the mortgage, yk?

Originally Posted by Captain_Crunch

Bankrate has a calculator that will figure that for you..

http://www.bankrate.com/calculators/...alculator.aspx

Yeah, amortization, that's the word I was looking for, lol.

Ok, so I went there, typed in the original amount of the loan, plus the date we started paying, 6 yrs ago, plus the amount of our monthly payment. After I clicked 'calculate', it changed the monthly payment amount to something way lower than what we actually pay. I tried it also w/the amount left on the loan, and same thing. I'm figuring that's because we have our taxes and insurance rolled into our monthly payment, so how do I calculate that?

ETA...Oops, I made a mistake the first time I did it. Going from what we owe now, if we paid an extra $300/month, we won't have it paid off until 2024.. However, if we can possibly do $600/month extra, we could pay it off in 10 yrs, which is what we'd like to do if possible. Is that accurate, though, considering what we actually pay now includes the insurance and taxes? That part confuses me.

If that $600/month would really pay it off in 10 yrs, I think we could swing it, if we really do some cutting back on luxuries.

[sunflower.mama]

I would def. look into the refi. I have no idea if your payment history would impact at all. If you think of it from the perspective of a new bank, going only by your credit report - what diff would it make if you've been late on your payments - as long as you haven't been so late as to have it reported? Given your eagerness to pay off early, I'd be exploring all avenues to lower your interest rates, esp since they are at an all time low.

[nd_deadhead]

Your mortgage payment statement should break down how much of your payment is principal/interest, and how much is insurance/taxes. Given your current balance and interest rate, I calculated that a principal/interest payment of $1087/month will be required to pay off the loan in 15 years. Of course your taxes and insurance are in addition to this amount.

With consistent late payments, my guess is that your credit score isn't very good, which will impact the interest rate you could get in a refinance. The lower the credit score, the higher the interest rate. You might not be able to improve much on 6.5%, even with a 15-yr mortgage, and you'd have to pay closing costs.

In your case, I think increased payments are the way to go. The advantage to this (in addition to saving closing costs) is that your REQUIRED payment doesn't change - if, so some reason, you can't or don't want to make the increased payment, you don't have to. If you refinance for 15 years, your minimum payment increases a lot.

[Chicky2]

Ok, so my escrow balance is $3,269.32

Monthly escrow payment is $393.76

County tax estimate is $545.63

City tax estimate is $1,929.24 (why the heck are we paying this if we are in the county?)

Homeowners/property insurance is $1,540.00/yr

Mortgage insurance is $617.40/yr or $51.45/month

All of the above come out of the escrow balance, correct? We never get a bill for any of it...

Sorry for sounding so uninformed about it all. We were a couple who needed to get the papers signed and get busy building a house for MIL here. When we bought the house my dh was working full time and going to school full time. His aunt was sick and came to live/die here. I was a wreck and I'm surprised I was able to sign the papers at all!

So, w/this info, how do I figure out how much we need to pay (extra) each month to pay it off in 10 yrs? (I really suck at math).

[nd_deadhead]

Your monthly escrow payment of $393.76 includes city taxes, county taxes, homeowners insurance, and mortgage insurance.

You said your total payment is $1246.31, so the amount of the payment that you put toward the mortgage itself (principal and interest) is $852.55. That number should be on your statement somewhere too.

So putting just an extra $234/month would have your mortgage paid off in 15 years. Pay an extra $300/month, and you will own your home outright in 13.7 years. A $400/month increase brings you down to 12 years. Amazing, isn't it?

In your case, since your target is about 15 years, I'd put $234/month toward the mortgage, and anything else extra into your IRA.

You might be able to reduce your escrow payment very soon, maybe even right away. Mortgage insurance is only required if your loan value is more than 80% of the value of the home. So if home prices have increased in your area, or if you made a pretty good down payment when you bought the house, you might be able to get rid of the $51.45/month for mortgage insurance. You originally borrowed $135,000 six years ago; if you made a down payment of $20,000 you will have almost reached that magic number of 80% (assuming home prices have stayed about the same). Lenders don't automatically drop mortgage insurance when you get to 80% - you have to ask them to take it off, and might have to get an appraisal of the home to show that your balance is 80% or less of the value. Around here an appraisal costs about $400 - or 8 months worth of mortgage insurance!

Once you get rid of mortgage ins, you can either put that extra $50 toward the loan (paying it off even faster), or put it in your IRA.

[nd_deadhead]

Oops, I just noticed your last question. You would need to pay an extra $566/month to pay off your loan in 10 years.

But if you increase your payment that much, you will be able to get rid of your mortgage insurance in less than 2 years (maybe a lot less, if home values in your neighborhood have increased, or you made a big down payment).

It's not about being good at math - it's knowing how to use a spreadsheet to do the math for you!

[Noelle C.]

Look into pre-payment penalties. Some home loans have them, some don't. It'd be a good idea to find out if you'd be hit with fees, which can be substantial, for paying off ahead of time (less interest for them, so they smack you for fees). If there are none, awesome.

[Chicky2]

Thank you all for all your help!

We paid $10,000 down, almost 6 yrs ago. Home prices are about the same in our area.

I will definitely check about pre-payment penalties.

Looking at our budget, an extra $600 (most months, barring anything unforeseen) is totally doable for us, as we have around $1000 left each month after bills/groceries, etc..

YAY!!!