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Thread: Using LOC to pay off Mortgage Faster ( Lump sum Pre Payment ). Is it worth it ?

  1. #16
    Luv Saving People Money MortgageQueen's Avatar
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    I have a HUGEapology to make (mostly to TJthemanto) and kudos to the newcomer Rescuer for catching my mistake. I seriously think I was on crack this week!! Honestly, I don't know what I was thinking. I actually sat here wracking my brain trying to think WHAT I was THINKING!!! The only (very slim excuse) I could think of is I've been working on a multi-million $ funding with multi-facets to it and my brain was just spitting out bigger numbers. Hard to explain . . but I just feel TERRIBLE that I gave incorrect information.
    Soooo sorry TJ!!

    I am going back and erasing the INCORRECT information and than I am going to post the CORRECT information.
    Apologies to all again!!

  2. #17
    Luv Saving People Money MortgageQueen's Avatar
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    The corrected info is now posted in initial answer and so marked `Corrected``

  3. #18
    Canadian Guru
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    Quote Originally Posted by MortgageQueen View Post
    I have a HUGEapology to make (mostly to TJthemanto) and kudos to the newcomer Rescuer for catching my mistake. I seriously think I was on crack this week!! Honestly, I don't know what I was thinking. I actually sat here wracking my brain trying to think WHAT I was THINKING!!! The only (very slim excuse) I could think of is I've been working on a multi-million $ funding with multi-facets to it and my brain was just spitting out bigger numbers. Hard to explain . . but I just feel TERRIBLE that I gave incorrect information.
    Soooo sorry TJ!!

    I am going back and erasing the INCORRECT information and than I am going to post the CORRECT information.
    Apologies to all again!!
    No need to apologise , its just a calculation error ..no big deal.

    You were still right about not taking another debt to pay off another debt , makes no sense as you said.

    I was thinking the same too, but for some reason I thought the 30 yr amortization might play into it, but I guess it makes no difference

  4. #19
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    Quote Originally Posted by Rescuer View Post
    Interest only payments on a $20,000 line of credit would be approx $63 a month.... not over $700. That would be an interest AND principal payment, and would pay off the HELOC in approximately 3 years.
    However, instead of increasing your debt again by $20,000 you would still be further ahead to set money aside until you had enough to pay a lump sum towards the mortgage. Another option to look for when you are deciding on a mortgage is to make sure you have the option to make a double payment whenever you want. The "second" payment is applied directly to the principal.
    I am not sure if they can double the payments.

    Their lump sum pre payment privilege is 20 % , so I am assuming ( not sure ) their monthly payment increase should also be 20 % , but even that should help.

    Plus I will tell them to make the payment frequency weekly & not monthly , that should help a bit too.

  5. #20
    CaLoonie
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    They wont come out ahead if you do the simple math on it.

    yes they lower there current mort down by 20 K but then they pay higher interest on the monies they used to pay it down.

    they would end up paying more in interest.

    The best way is to increase monthly payment.

    If you take the monthly payment of the 20 k loan which is about 365 a month give or take an put it on the monthly payments it will be better for them.

    With a mort with a starting balance of 162,000 which would give you a monthly payment of 700.16 or so over 30 years. if you put the 365 per month on it, it cuts the time down by 13 years or so I think its a little more to tell you the truth.

    However if you are at 150,000 remaining ad started paying the additional 365 per month since your already in a few years it would most likely be around 12 years cut off.

    Just remember the additional 365 goes on the balance right away. paying lump sum is not always the best but paying additional montly amounts can give you a large benefit with out having to pay interest on another loan

  6. #21
    CaLoonie
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    Also if they are not allowed to pay the full 365 per month. Save the excess over the allowed amount and on renewal pay a lump sum

    most let you pay 15-20 percent additional so i am guessing at most 140 extra per month then save the other 225 for the next couple of years and put a lump sum on. No interest to pay/ and you have extra money if something happens. Also move to accelerated weekly payments. this will cut down big time aswell.

    with accelerated weekly payments you can increase your payments by the 15-20 percent plus you make make more payments per year and due to the payments being so often you save on interest.

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