--- In [email protected], "suziezuzie" <[EMAIL PROTECTED]> wrote:
>
> --- In [email protected], "mainstream20016"
> <mainstream20016@> wrote:
> >
> > Mark,
> > First of all, congratulations, for living in Colorado. I
> hope you experience the
> > inspirational beauty of the Rockies every day. I long ago vowed
> that I would live
> > in Colorado when I got my life together. I'm not there yet, but
> perhaps one day I'll
> > live NW of Boulder, perhaps in or near Ward, or Allenspark. Where
> in Colorado do you
> > live?
> > Anyway, back to your inquiry. I'm no money pro, but like
> so many, I regard my own
> > opinion highly, and I'd like to offer my $.02 regarding your
> inquiry 'home loan alternative'.
> > The stated concept, as I understand it, is to simplify the
> administration of debt service and
> > maximize the use of your money. The stategy is accomplished by
> creation of an account
> > to which all streams of income are directed and from which all debt
> service is paid. Such
> > an account would be created at the same time that you create a new
> mortgage, specifically
> > a Home Equity Line of Credit. ( HELOC ).
> > Practically speaking, you'd take out a HELOC, the
> proceeds of which would pay off
> > the existing mortgage completely. Additionally, you would direct
> all streams of income
> > (direct deposit of paycheck, etc) into the new administrative
> account. Likewise, you would
> > authorize the administrative account to make payments on the HELOC
> and to service non-
> > residential debt on a regular basis. ( school loan debt, car loan
> debt, credit card debt, etc.)
> > The concept is marketed to you as a means of paying principal owed
> on the residential
> > debt in an earlier fashion than you understand is available to you
> now with your current
> > mortgage. The administrative account would accomplish this by
> frequently (perhaps
> > daily?) making additional principal payments on your residential
> loan from whatever
> > excess funds remain in the administrative account after the monthly
> cycle of debt service
> > has been satisfied.
> > I find the concept laudable, and simple to administer from your
> side, but I would have
> > some discomfort about the frequent transactions and the accuracy of
> the additional small
> > extra principal payments. There are simpler, surer ways to
> accomplish your goal of
> > accelerated principal payments.
> > What is not clear to me is whether you realize the high
> degree of probability that
> > you can already make additional principal payments to your existing
> mortgage.
> > You stated that at the time that you bought the house,
> you borrowed $100K for the
> > $233K purchase. That means that your down payment was $133K,
> right ? That is a
> > significant down payment, and I don't understand how you must wait
> 10 years before
> > being able to make any principal payments against the balance
> borrowed at the time of
> > purchase, unless your mortgage requires only interest-only payments
> for the first 10
> > years. In any event, I don't think you can be penalized for pre-
> paying principal.
> > Back to the concept of the loan you inquired about -
> What is not mentioned in the
> > article is the nature of HELOC loans, but I would strongly suggest
> you think clearly before
> > you make a HELOC loan, particularly if your commendable goals of
> reducing debt early are
> > as stated, as HELOC loans are like crack cocaine to an
> undisciplined borrower. Their
> > primary effect as a profitable financial product is to tempt
> homeowners to finance current
> > living with long-term debt. The line of credit can increase with
> increases in the value of
> > the home, and many people over the past decade have continued to
> draw from the HELOC
> > as housing prices rose, again, funding current expenditures with
> the HELOC, which was
> > increased with increasing equity of a booming housing market.
> Although long-term
> > appreciation is a reality for real estate, I would not be surprised
> if the value of real estate
> > remains flat for a decade or more, and perhaps the recent
> significant declines in real
> > estate value will continue for a good part of the next decade, as
> well. Houses are a good
> > place to rest, but not necessarily a good investment vehicle,
> particularly if one buys at the
> > peak of a market.
> > I would suggest avoiding the temptation of a HELOC loan
> by refusing to be enticed.
> > Re-read you loan document to determine if there are any
> prohibitions against pre-
> > payment of principal. I doubt it. There are safer ways to pay the
> principal early than a
> > HELOC. Create an amortization schedule for your existing loan -
> just Google 'home-loan
> > amortization schedule'. Type in your loan rate, and term, and
> you'll discover the principal
> > payment each month for your existing loan. If you want to decrease
> the life of your loan by
> > half, say, from 30 to 15 years, each month simply make an
> additional principal payment
> > for the amount of principal that will be due on the next month's
> payment schedule. Each
> > month, the amount will increase slightly, but the earlier in the
> life of the loan you start, the
> > greater impact your additional principal payment. By making
> additional payments to the
> > principal balance, you can save tremendous amounts of money over
> the life of the loan,
> > and shorten the length of time it will take you to be mortgage-free.
> > An article follows, but I wouldn't go near the HELOC plan.
> > -mainstream
> >
> >
> > http://www.troubleshooter.com/ConsumerInformation/ColumnDetails.cfm?
> > ColumnID=733
> > MY BANK, MY LOAN, MY WAY
> > by - Matt Klaess
> > American Guaranty Mortgage
> > April 11, 2007
> > A new mortgage comes to the United States, a different type of
> mortgage that allows the
> > borrower the flexibility to manage his assets and liabilities. All
> of the borrowers hard
> > earned money that may be sitting in a checking or savings account
> earning little or no
> > interest, can now be used to reduce the amount of interest paid on
> their largest debt –
> > their mortgage. Without changing any monthly spending habits or
> making extra monthly
> > payments towards principal on your mortgage, this product will
> allow you to manage your
> > cash flow like never before and pay off your mortgage.
> >
> > The premise of this loan is that borrowers finance the purchase of
> a home or refinance an
> > existing loan with a 1st mortgage HELOC (home equity line of
> credit). Borrowers then
> > begin directly depositing their monthly cash flow (direct deposit
> paychecks, income from
> > other sources, etc.) in their mortgage account or HELOC. Monthly
> expenses, other than
> > mortgage payments, are funded by draws against your available
> funds, just like a checking
> > account, using auto bill paying, ATM withdrawals or a credit card
> tied to your account. The
> > borrower's cash flow is then applied to reduce the principal of
> your mortgage on a daily
> > basis which reduces the amount of interest you pay. The compounding
> effect of this
> > product can easily knock 15 years off your mortgage, compared to
> the typical mortgage
> > where interest is all paid up front in the first 15 years. This
> product will allow the borrower
> > to lower their monthly mortgage payment every single monthÂ…..that's
> right, lower their
> > payment every month.
> >
> > There are other great advantages to this product and it is
> something that needs to be
> > explained by a mortgage professional that is trained in this
> product and how it works.
> >
>
> mainstream20016
>
> This is great information. I'll check it out carefully. I really need
> to call my bank and find out about paying the principle down and how
> this would effect the overall interest on the loan. There are no pre
> payment penalities.
>
> When you do move to Colorado, contact me and I'll show you around. I
> know the Boulder area but not exactly the towns you mentioned. We
> live in Fort Collins which is around 40 minutes north of Boulder.
> Fort Collins is a town which is backed up against the low lying
> Rockies unlike Boulder which is backed right into the soaring hights
> of the mountains. Fort Collins reminds me of the US the way it was in
> the 60s, very nice people, very clean town, simple life, four
> moderate seasons, very comfortable, cheap housing (for now, get it
> while it's cheap!) and overall a perfect place to settle and raise a
> family. Thanks again for the loan information and I hope to see you
> soon.
>
> Mark
Mark,
Thank you for the compliment, re: great info.
With no pre-payment penalties, you can pre-pay the principle each month
routinely. To
make the sacrifice more palatable, review the amortization schedule. Look for
next
month's entry. The principle amount that will be due next month will be
clearly stated. On
the same line will appear the interest amount that will be due next month. For
every pre-
paid principle amount you make, you automatically save the amount listed as
interest for
that same month ! By viewing each month's extra principle payment and the
interest
saved, one can gain satisfaction from the process.
I suggest writing a separate check for the extra-principle payment,
and clearly
stating on the check that it is to be applied only to the principle balance. If
you send a
coupon with your regular mortgage payment, write the extra-principle payment
amount in
the appropriate box on the coupon, and send both checks and the coupon
together. That
way you prevent the mortgage administrator from erroneously applying your extra
principle payment incorrectly, (such as to your escrow account, where it will
not give you
the effect you seek). You might want to check out 'The Banker's Secret', by
Mark Eisenson,
Villard publishers. It gives motivation to pre-pay mortgage interest.
Your monthly statement might reflect your pre-payment actions. If
not, Every
couple of years, you can request a payment history to give you comfort that
your actions
are recorded properly by the mortgage administrator.
-mainstream
