can i pay 50k to my mortgage loan and ask bank to reduce monthly premium?

[Konebhar6]

4 minutes ago, usauae said:

Are there any disadvantages of recast bhayya ?

I don't put emotions into financial decisions. Its simple math.

If your current mortgage is less than the Interest rates banks are offering (5-5.25%), there is no need to re-case. Keep money in bank and it keeps growing. When the interest rates dip below your mortgage, you can refinance or recast.

Recast is a also a good option if your current mortgage interest rates are > 5%. 

[chicagoafdb]

2 minutes ago, Konebhar6 said:

I don't put emotions into financial decisions. Its simple math.

If your current mortgage is less than the Interest rates banks are offering (5-5.25%), there is no need to re-case. Keep money in bank and it keeps growing. When the interest rates dip below your mortgage, you can refinance or recast.

Recast is a also a good option if your current mortgage interest rates are > 5%. 

Basically in current market pay more down ? These interest rates will be here for long time I guess. Even getting 6 percent not possible for 15 yr term.. I don't see any other way around.  pay 6.5 mortgage and get 5.5 bank interest may not help.. also interest we pay is after tax..

[Undilaemanchikalam]

Just now, Konebhar6 said:

Would you offer this advice even if his mortgage is less than 4.5%?

Depends on his financial health.

If he is on Visa and his monthly payment is more then average rent in the area then yes. 

if his interest + insurance + HOA + taxes + PMI is way more than average rent than yes. I know people who pay $250 towards PMI.. 

If he doesn’t have any other loan then I would put that money either for long term investments or if short term I would recommend parking in high interest savings account.

If he wanted to buy investment home, then here is the analysis. 

if sale price is $400k, 25% down is needed for investment home which is $100k. Monthly payments could be around $2200 with current interest rates. If $500 is going towards principal then he is earning $6000 on a $100k investment, which is almost same as high yielding savings account. If we compute it for 5 years (assuming interest rates will reduce to 4%) and he is planning to sell it, then on $100k investment he will get below as return in profit.

$40k towards principal as a profit for the investment home. Say it appreciates to $500k at 5th year, considering realtor commission to sell the home and other repairs ($10k), overall profit is $60k +$40 k (principal) = $100k. If the house just holds its value then the profit is just $40k. If it depreciates then it is a bad investment choice.

Vs On an high yielding saving account he can make profit of $35k for 5 years. 

vs if any other investment gives him 10% return on $100k it would $60 to $70k in profit… 
 

[Konebhar6]

8 minutes ago, Undilaemanchikalam said:

Depends on his financial health.

If he is on Visa and his monthly payment is more then average rent in the area then yes. 

if his interest + insurance + HOA + taxes + PMI is way more than average rent than yes. I know people who pay $250 towards PMI.. 

If he doesn’t have any other loan then I would put that money either for long term investments or if short term I would recommend parking in high interest savings account.

If he wanted to buy investment home, then here is the analysis. 

if sale price is $400k, 25% down is needed for investment home which is $100k. Monthly payments could be around $2200 with current interest rates. If $500 is going towards principal then he is earning $6000 on a $100k investment, which is almost same as high yielding savings account. If we compute it for 5 years (assuming interest rates will reduce to 4%) and he is planning to sell it, then on $100k investment he will get below as return in profit.

$40k towards principal as a profit for the investment home. Say it appreciates to $500k at 5th year, considering realtor commission to sell the home and other repairs ($10k), overall profit is $60k +$40 k (principal) = $100k. If the house just holds its value then the profit is just $40k. If it depreciates then it is a bad investment choice.

Vs On an high yielding saving account he can make profit of $35k for 5 years. 

vs if any other investment gives him 10% return on $100k it would $60 to $70k in profit… 
 

Interesting. I have not considered PMI. If someone's mortgage insurance rate is less than current savings rate, I need to consider PMI into calculation as well. 

Your subsequent analysis - If $500 is the principle in every month EMI ($6000/yr) how is this considered a profit? Its not. Its money the person is paying from his pocket on top of $100k. You cannot consider it as profit in any of your calculations.

[Konebhar6]

19 minutes ago, chicagoafdb said:

Basically in current market pay more down ? These interest rates will be here for long time I guess. Even getting 6 percent not possible for 15 yr term.. I don't see any other way around.  pay 6.5 mortgage and get 5.5 bank interest may not help.. also interest we pay is after tax..

If housing market crashes. All your investment is under water. Even if the interest rates drop, you cannot refinance as you will be asked to put more money. For e.g.

You bought a home for $1M. Lets say you paid 20% so $200k down. So 800K is your mortgage. If market crashes and your home is now only valued at $700k, and the rates drop to 3%. For you to refinance, bank will only refinance 80% of money which will be $560. So you will be required to pay an additional $800k-$560k=$240K. In essential you paid $440k overall and only own 20% of your equity in your home.

Lets say the market goes up. You only lost 1% interest on the money on your house which is negligible.

So cash is hand is always more useful. 

If you want no hassel -> Go with your gut. Keep things simple and payoff as much as you can and reduce monthly payments. You cannot put a monetary value on stress free mind

 

[JavaBava]

3 hours ago, Undilaemanchikalam said:

Could you please explain more on this?

I thought paying additional amount to principal every month will reduce duration of loan but monthly payments and interest paid each month will be same. 

Check any amortization calculator on the web. If you pay additional amount, you will save almost double that amount in interest. When you look at the total interest you pay for the period of the loan. 

[JavaBava]

3 hours ago, pittagoda said:

Interest won't reduce. Only the term will reduce..

Check any amortization calculator on the web. If you pay additional amount, you will save almost double that amount in interest. When you look at the total interest you pay for the period of the loan. 

[JavaBava]

2 minutes ago, JavaBava said:

Check any amortization calculator on the web. If you pay additional amount, you will save almost double that amount in interest. When you look at the total interest you pay for the period of the loan. 

Quote

 

For a 600k loan, 

 

Monthly payment

$3,321

Total interest paid

$595,437

Total cost of loan

$1,195,437

Payoff date

Aug 2053

 

 

 

if you pay 100k after 1 yr: 

 

Monthly payment

$3,321

Total interest paid

$335,642

Total cost of loan

$935,642

Payoff date

Aug 2044

 

compare the total interest you pay for your loan. 

[TechSri]

On 7/5/2023 at 10:27 PM, pittagoda said:

Depending upon the bank you can do recast. I am saving for 18 months to pay off 350k and cost of recast is 500. Sep ki kadtha. Better to pay more during recast.  They only allow once. Same 3% but they will recalculate for 30 years and my monthly will go from 5250 to 3950. 

Recasting ki and extra payment toward principal ki madya theda enti.  New to this. 

[JavaBava]

14 minutes ago, TechSri said:

Recasting ki and extra payment toward principal ki madya theda enti.  New to this. 

Recasting: lower monthly emi , but less savings in total interest. 
 

pay to principal: same emi, save on total interest and reducedp loan period. 

[macha]

You can’t decrease your monthly payments but you can make money not spent towards interest by doing something called rebase … so your not paying toward interest 

[hunkyfunky2]

3 hours ago, Undilaemanchikalam said:

Depends on his financial health.

If he is on Visa and his monthly payment is more then average rent in the area then yes. 

if his interest + insurance + HOA + taxes + PMI is way more than average rent than yes. I know people who pay $250 towards PMI.. 

If he doesn’t have any other loan then I would put that money either for long term investments or if short term I would recommend parking in high interest savings account.

If he wanted to buy investment home, then here is the analysis. 

if sale price is $400k, 25% down is needed for investment home which is $100k. Monthly payments could be around $2200 with current interest rates. If $500 is going towards principal then he is earning $6000 on a $100k investment, which is almost same as high yielding savings account. If we compute it for 5 years (assuming interest rates will reduce to 4%) and he is planning to sell it, then on $100k investment he will get below as return in profit.

$40k towards principal as a profit for the investment home. Say it appreciates to $500k at 5th year, considering realtor commission to sell the home and other repairs ($10k), overall profit is $60k +$40 k (principal) = $100k. If the house just holds its value then the profit is just $40k. If it depreciates then it is a bad investment choice.

Vs On an high yielding saving account he can make profit of $35k for 5 years. 

vs if any other investment gives him 10% return on $100k it would $60 to $70k in profit… 
 

You are assuming 25% appreciation... If you see history, only few cities have that , that too only few times...

 

[chicagosubbu]

On 7/5/2023 at 9:39 PM, neneno1 said:

Nope. Refinance is the only option

Recast is also one option

[chicagosubbu]

2 hours ago, macha said:

You can’t decrease your monthly payments but you can make money not spent towards interest by doing something called rebase … so your not paying toward interest 

Recast is a options 

[HtmlBro]

On 7/5/2023 at 6:41 PM, Pahelwan2 said:

With that money buy another property vayya. 

Invest. 50k vunade neku mortgage vachi 4٪ interest anu kundamu, yee 50k nee S&P lo invest cheste average 8% returns. Think about it.