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I bought a piece of land for $41000 in 2011 from a seller that financed a loan at 2.5% for 5 years. I put $5k down as a downpayment in August 2011 as well as $638.91 for that month's mortgage payment. I have been making $638.91 payments for every month since.
According to my spreadsheet, I have a balance of $854.54 left. However, the seller is claiming I still owe $638.91 per month until July based on the amortization schedule.
Since I am a sloppy accountant, I probably made a mistake somewhere. Does anyone know what could have happened? I had my checks electronically sent per month.
P.S>I'd check my bank statements.. but my bank wants $30 per paper statement for every month prior to 2014....may have to do that.
Accounting in NOT my forte. However, my amortization schedule has me paying more INTEREST at the beginning of the loan, with minimal going toward the PRINCIPLE. It balances out toward the middle, then reverses toward the end. This is why if you have a loan where you can make additional payments toward the principle with no prepayment penalty, you can save thousands of $$$ over the lifetime of the loan. Any extra I pay over the payment each month goes toward the principle. Can't you just ask the seller for an accounting?
I bought a piece of land for $41000 in 2011 from a seller that financed a loan at 2.5% for 5 years. I put $5k down as a downpayment in August 2011 as well as $638.91 for that month's mortgage payment. I have been making $638.91 payments for every month since.
According to my spreadsheet, I have a balance of $854.54 left. However, the seller is claiming I still owe $638.91 per month until July based on the amortization schedule.
Since I am a sloppy accountant, I probably made a mistake somewhere. Does anyone know what could have happened? I had my checks electronically sent per month.
P.S>I'd check my bank statements.. but my bank wants $30 per paper statement for every month prior to 2014....may have to do that.
Your payment of $638.91 is calculated based on 36K loan you had. It'll run for full 5 years and that's why that payment. Unless you made extra payments - bank/seller is correct your last payment will be in July this year.
I bought a piece of land for $41000 in 2011 from a seller that financed a loan at 2.5% for 5 years. I put $5k down as a downpayment in August 2011 as well as $638.91 for that month's mortgage payment. I have been making $638.91 payments for every month since.
According to my spreadsheet, I have a balance of $854.54 left. However, the seller is claiming I still owe $638.91 per month until July based on the amortization schedule.
Since I am a sloppy accountant, I probably made a mistake somewhere. Does anyone know what could have happened? I had my checks electronically sent per month.
P.S>I'd check my bank statements.. but my bank wants $30 per paper statement for every month prior to 2014....may have to do that.
Does your bank allow you to look up records online? I would check on that since what you owe depends upon when your payments were made--and for the period for which each covered.
IF you entered into the agreement on August 1, 2011, and you had an initial $36,000 balance, your monthly payment of $638.91 would have been correct. If you made all of your payments on schedule, and for the amount noted, then you would still owe your monthly payment until July of this year.
HOWEVER, if you paid $5,000 down and also made a payment of $638.91 at that time, that would NOT have been according to the amortization schedule since the first payment is due one month into the loan (or for a prorated time if you started, say, mid-month and moved to monthly payments). IF you made a separate, initial payment, that totally screws up the amortization schedule since no interest was owed at the onset--and all of your payment should have been applied against the principal. In that case, you would need to calculate the interest amount paid each month, and subtract the principal payment amount from your balance owed each month. The difference probably isn't that great (i.e. not enough to cut months off of your payments), but it should reduce somewhat the final balance owed at the end of the contract.
Unfortunately, you didn't keep track of a running balance with your Seller. That would have eliminated any confusion. What is your "spreadsheet"? Was that from some other source, or was it your payment schedule as calculated by you each month?
In any case, unless you made other payments not a part of the amortization schedule, you still owe more than you estimate. At least the Seller gave you a very good interest rate.
If you, indeed, made an initial payment of $5,638.91 ($5k + $638.91 monthly payment), the initial amount of your loan was effectively $35,361.09--not $36,000.
The 5-year amortization schedule for a loan of $35,361 would have called for monthly payments of $627.56. So...for you to have the amortized payments go the full 5 years (60 months), you should have been paying the lesser amount. Instead (and this is based upon you paying your first payment early--if, in fact, that was the case) you have been paying $11.35 more each month than amortization would call for. Over 60 months that comes to $681 in extra payments. So...your payoff date would be cut short by just over one month.
So, as you can see, when you made your payments is very important.
P.S. If you haven't received the Deed yet, I hope he has good title.
I bought a piece of land for $41000 in 2011 from a seller that financed a loan at 2.5% for 5 years. I put $5k down as a downpayment in August 2011 as well as $638.91 for that month's mortgage payment. I have been making $638.91 payments for every month since.
According to my spreadsheet, I have a balance of $854.54 left. However, the seller is claiming I still owe $638.91 per month until July based on the amortization schedule.
Since I am a sloppy accountant, I probably made a mistake somewhere. Does anyone know what could have happened? I had my checks electronically sent per month.
P.S>I'd check my bank statements.. but my bank wants $30 per paper statement for every month prior to 2014....may have to do that.
Interest is paid in arrears so you put down $5,000 then accrued interest for however many days between close and the first of the month. Need more details to help you out but assuming you closed on Aug 1st and made the first payment at close on Aug 1st then you have been overpaying $11.34 a month because that first month's payment is actually additional down. Assuming all payments were constant your ending balance on 6-1-16 is $552.89 after the payment for that month is made.
If you closed on say Aug 15th with $5,000 down and a payment on Aug 15th of $638.91, again this is now additional toward principal because there has been no interest accrued yet, your interest accrued was only about $36.31 for the Sept payment meaning you over payed Sept by $48.70 but leaves the other months at $11.34 over and your closing balance at $510.82 on 6-1-16 after that month's payment.
If you do this again next time set the first payment a full month out it makes everything easier and is why banks do it. Like right now if you closed on a loan today you would prepay 21 or 22 days interest at close, should be 21 but I've seen a lenders include the day you close. Then your first payment would be on 5-1-16 and include all interest accrued during April, interest is paid in arrears (after it is accrued).
P.S. If you haven't received the Deed yet, I hope he has good title.
The seller in this case normally should provide a Warranty Deed, correct? How does a seller on a contract such as this create a Warranty Deed? If it was closed at a closing company, would they create the deed once the seller contacts them after it's paid off at the end of the 5 years?
The seller in this case normally should provide a Warranty Deed, correct? How does a seller on a contract such as this create a Warranty Deed? If it was closed at a closing company, would they create the deed once the seller contacts them after it's paid off at the end of the 5 years?
What do you mean--how does a Seller "create" a Deed? It's the same as in any situation. Either the Seller writes one up with the correct information, or an attorney does so, or some other party such as a title company. It gets executed, with the signature(s) notarized, so the Deed can be recorded.
There are two basic ways of providing Seller financing. In one way, the Deed transfers at closing and the Seller literally takes back a mortgage to secure the loan, just like a bank would do. The other way, which is preferable to Sellers, is to enter into a Land Contract (aka Contract for Deed or other name, depending on the state; in Michigan, it's called a Land Contract). With a Land Contract, the Deed isn't conveyed until the contract is paid off in full. And, yes, a Warranty Deed would be best--and it should have been stipulated in the contract.
One of the biggest problems with Seller financing is that Buyers oftentimes don't do their full due diligence when they enter into the contract. They will often neglect to get title insurance or even research the title. Hopefully that isn't the case with the OP.
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