Welcome to City-Data.com Forum!
U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 12-27-2018, 01:34 PM
 
19,591 posts, read 17,872,733 times
Reputation: 17120

Advertisements

[quote=Snowpacked;53987177]
Quote:
Originally Posted by mathjak107 View Post

Look at an amortization schedule. You pay more in interest early, which means the lender is getting their money firstly. The principle is where you want the money to go and that is always less early. Not good for the borrower.
That's generally correct but incomplete.

Most mortgages allow for overpayments to be applied to ones principal balance from day one.
Add a little to each payment earmarking the extra towards interest.
Add a full or partial payment anytime earmarking the extra towards interest.
Add say a $25,000 payment earmarked towards principal and the principal balance will decrease by $25,000.
Reply With Quote Quick reply to this message

 
Old 12-27-2018, 02:11 PM
 
949 posts, read 567,817 times
Reputation: 1490
[quote=Bp25;53987623]
Quote:
Originally Posted by Snowpacked View Post


That's because your remaining loan amount is higher in the beginning. It's really simple math but many people seem to struggle with it.


Think about it, if more money went to pay the principle (which means that part of interest accrued have to be deferred - not sure why lenders will agree to that) then after a year your principle will be lower and you will be the first one to complain that you have to pay effectively higher interest rate on a lower balance.



Also, put yourself on the other side. Say you loaned someone 100k with 3% interest and they took the loan for 10 years. There are two ways to do it, amortized over 10 years (like a mortgage so that the balance will be zero at the end of 10 years) or just pay 3% interest per year and pay back the entire principle at the end of the 10 years (like interest only loan). Now, after taking the loan they insist that their monthly payment to towards principal only and you agree. After 5 years or so, the principal will be paid and that guy or gal comes back and claims that the principal is paid and they owe nothing to you, therefore they will stop payment. How will you feel about that?
Yes it is easy. That is the way the lenders want it to be. They want their money now and when you get an equity loan. They are able to do the calculation and still make money. Do not be fooled into thinking that it cannot be done differently.
Reply With Quote Quick reply to this message
 
Old 12-28-2018, 07:08 AM
 
106,147 posts, read 108,118,136 times
Reputation: 79692
[quote=EDS_;53989975]
Quote:
Originally Posted by Snowpacked View Post

That's generally correct but incomplete.

Most mortgages allow for overpayments to be applied to ones principal balance from day one.
Add a little to each payment earmarking the extra towards interest.
Add a full or partial payment anytime earmarking the extra towards interest.
Add say a $25,000 payment earmarked towards principal and the principal balance will decrease by $25,000.
whether adding extra principal to each payment is a good idea is a very debated topic ...

it can really put pressure on other investments you need to generate income in retirement under a lot more pressure to " have a good time frame " .

the less time you give market investments to grow the more time frame dependent they become . many really hurt themselves when they wait until they pay off the house channeling extra money in , then they hit a poor strech of time like 2000 to 2015 and see little growth when they start to put more money in to investment late in the game . .

so the longer you give yourself the less time frame dependent market investments become .

so channeling extra money in to the house may end up having the income generating ability hurt more than the cost savings in interest .

it really is going to be a personal situation issue but it is not a slam dunk that channeling more money in to the house and saving some interest is a better deal
Reply With Quote Quick reply to this message
 
Old 01-04-2019, 03:02 AM
 
Location: Silicon Valley
7,623 posts, read 4,542,559 times
Reputation: 12680
MJ is winner by TKO!!!


But you'll never win the amortization chart secrets!!!! mwhahaha


Ok, time for bed.
Reply With Quote Quick reply to this message
 
Old 01-04-2019, 03:54 AM
 
Location: The Triad
34,090 posts, read 82,666,754 times
Reputation: 43653
Quote:
Originally Posted by inquisitive2 View Post
I'm about 4 years into my mortgage.
Am I better off to make some extra payments on my mortgage or invest in some stock?
How much of your NET income in 2014 was spent on housing?
How much of your NET income in 2018 was spent on housing?
Is that percentage declining? Are you at/approaching the 23% (12/52's) target yet?
These are the questions to ask regarding adjustments to your mortgage.
===

As regards getting INTO the equities market with fresh money... NOW? Hold off.
Reply With Quote Quick reply to this message
 
Old 01-04-2019, 11:59 AM
 
18,503 posts, read 15,491,212 times
Reputation: 16183
Quote:
Originally Posted by inquisitive2 View Post
I'm about 4 years into my mortgage. Am I better off to make some extra payments on my mortgage or invest in some stock?
Depends on your time horizon and your risk tolerance. Roughly speaking, paying down debts (mortgage or otherwise) is much like investing in bonds of comparable duration, with lower expected returns but also less volatility. As a rule of thumb I'd suggest investing in stocks if you can stomach the volatility without selling on impulse. If you are closer to retirement you should re-evaluate.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics

All times are GMT -6.

© 2005-2024, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top