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Hello cd friends, my coworker asked me the best way to do this and I haven't had a mortgage in many years so I was not sure if things had changed.
Should he just add extra to the payment and specify to the principle as I used to in the old days, or is there a better way?
It is a 7 year loan with a 15,000 balloon due at the end.
TIA!
I will check in a few hours, off to work.
If this were a straight 15 or 30 amortization I think the answer you gave would be ok, but with a balloon loan the extra payments might not be applied the same way. Iam pretty sure that the way most lenders will credit those extra payments your pal is going to have a little accounting mess on their hands.
The other thing I gotta ask is what kind of rate does this loan have and what is the overall situation this pal is in. If the seven year period is interest only (as is the case with most ballon payment situations) and they are likely to be in good shape to pay off the $15,000 and / or refi the whole loan the real 'savings' might be too tiny to worry about.
What is the pal's total equity in this property? What is total amount to refi?
If your pal makes payments on line, there should be a line he can fill in with additionally money to be applied toward principle. If your pal sends a check, the statement should also have a line that he can fill in with additional principle payments.
If this were a straight 15 or 30 amortization I think the answer you gave would be ok, but with a balloon loan the extra payments might not be applied the same way. Iam pretty sure that the way most lenders will credit those extra payments your pal is going to have a little accounting mess on their hands.
The other thing I gotta ask is what kind of rate does this loan have and what is the overall situation this pal is in. If the seven year period is interest only (as is the case with most ballon payment situations) and they are likely to be in good shape to pay off the $15,000 and / or refi the whole loan the real 'savings' might be too tiny to worry about.What is the pal's total equity in this property? What is total amount to refi?
No equity I think. It is a new mortgage.
Loan is 50,000 with 15,000 due upon sale of his current home so you can see there is no big trading going on. The prices of things in EM are basement. LOL... that is the selling price of the current home...
I should find him a calculator to see how much he is paying at 7%. Kinda high don't you think? He told me it is a loan from his father so he wants to pay it off quickly.
Thanks for your help. I thought about refi also but I doubt he could get any because it is an old farmhouse held together with newspaper...
Thanks for the help..
If your pal makes payments on line, there should be a line he can fill in with additionally money to be applied toward principle. If your pal sends a check, the statement should also have a line that he can fill in with additional principle payments.
Yep this is how I did it in the past. I did ask him if he received a coupon book, ( I remember them) and told him to look at the line. It is a private sort of loan but he said it went through a title company to service.
Wow just like that, top of the page a CD calculator.
I called him and he said that at the end of the seven years he can refi the balance. So I think he mistook the 15,000 from the sale of the current home as a balloon payment, I just explained to him that the balance remaining is not this. He is a young fellow, trying to get on his own...We have all been there. :-)
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Balloon payment? Got to review the actual loan...
