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I guess I was thinking that with todays rates who would be paying all that much to finance a car anyway. Many places offer 0% financing as well for new cars. The current bank rate for an auto loan is under 3%. Then again you do need great credit to get that rate.
The bank always gets the money owed to them first. If you make 2 payments on the same day the second payment would go completely to principal because no interest has accrued. Other than that the accrued interest needs to be paid first.[/quote]
Before somewhere around 1933, this may be true. But today...I would ask " What do I owe the 'bank' that allows them to collect interest first?
It's in your loan paperwork. If you sign a contract saying accrued interest is paid before principal, then that's your agreement.
LOL what I was referring to was...what exactly is being loaned to the homeowner that allows interest to be collected in return.
Other than the word "loan" spelled, I do not read what a loan actually was.
We shouldn't assume we were loaned something just because they used the word "loan" on the documents.
Something else to consider, and this may be specific to many loans but may not apply to all. On my Mortgage bill I see three lines that I can include amounts.
Line 1: Current monthly bill.
Line 2: Additional amount that I want applied to the principle.
Line 3: Amount that I want to pay in advance.
We pay the monthly bill as that is first and formost. If we pay more on the principle though, that does not change the agreement that we have to pay the monthly bill. It will help at the end of the loan but will not change our payments. If we pay a partial payment in advance I would almost bet that the bank would take that money and sit on it till a total payment is made. I say that because theoretically you could make a partial payment every other week and you would think that part of the interest would be paid. To get around that some banks will not apply that amount to the loan having the interest continue to add up.
I have never asked if ours does or does not. We just pay additional amounts each month and during the year.
LOL what I was referring to was...what exactly is being loaned to the homeowner that allows interest to be collected in return.
Other than the word "loan" spelled, I do not read what a loan actually was.
We shouldn't assume we were loaned something just because they used the word "loan" on the documents.
What???
You are loaned the capital to purchase the property. Do you really need that spelled out?
That's often how extra payments are applied: accrued interest first. Unless your loan contract prohibits it, it's fine to make additional principal payments whenever you want. Principal payment is different than early payment, as you've discovered...
When making a principal payment, it's best to send a check or pay at a branch in person. Make sure the check is labeled "Principal Payment Only" on the memo line, and point it out to the teller (or in the letter you mail with the check). Get a receipt or written acknowledgement that the principal payment was applied to principal only.
Yes, it will throw the amortization schedule off, but that doesn't matter. When you've paid it off you've paid it off. Amortization schedules always end up a bit off unless every single payment is applied on the exact day it's due.
FYI - I was a loan officer for many years and spent a decade in banking.
This is right on target. My background is also banking and loans.
Celsius, yes, it would help me understand better what capital you are referring because I don't see a specific meaning on the mortgage docs.
Oh my.
When you bought your house, did you give the seller the full amount of the contract price? If not, who did? I'll tell you - your bank did. Your bank bought the house, and now you're buying it from them.
When you bought your house, did you give the seller the full amount of the contract price? If not, who did? I'll tell you - your bank did. Your bank bought the house, and now you're buying it from them.
Actually he bought the house for the County, the bank financed it. He pays interest to the bank, the county always owns it forever. And then he pays property tax to the County, on top of the interest, and so called principal. That's why home ownership is such a rip off. You pay, and pay, and never "own" it.
Ideally in the past homes have risen in price and developed "equity". We saw what happened in 08, some did OK, many didn't. Personally I think that the always increasing value of a home is no longer sustainable. With jobs paying less, less people will be able to buy. Many banks have turned their foreclosure props over to Management Agency's to rent. Look at the depression of the 30's. That is what happened then. Many people couldn't buy a home until the 1950's. I see that same trend happening today.
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