simplysilky

Automatic Payment Program...BOA..

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Think more about a bonus check, tax refund check, or other lump sum that will be coming after closing the loan, or other funds that may not have been available at the time of closing.
I agree with you 100%. The math works in the case of non-borrowed funds being applied to reduce a balance once the loan had already beed secured. The way I interpreted the original assertion was that there was a way to speed up amortization by borrowing additional funds. That can't be, and I pressed the issue a bit because it would be misleading to have people think there is a way to 'borrow' their way to pay down principal faster. Its an anomaly.

Regarding IRAs, people should take advantage of this more. If your top marginal rate is above 15% (ie: any TAXABLE income above 31,850 if you are single and 63,700 if you are married), then deferal from federal tax is a no-brainer if there is any possible way that you can afford it. In the long run, you can't afford not to unless you are one of the lucky few that have a solid pension and other income streams.

This thread has really become a melting pot of topics...hopefully there is at least some useful info in here!

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It opened my eyes too, because I have long been in favor of just saving the money, and investing, versus making an additional payment to principal every month.

Maybe a little late for me, since I am now in year 13 of my mortgage, because now the interest payments are getting ever smaller.

I noticed a few years ago when my ARM rate was falling that the principal payment was much larger (because of the lower interest rate). Last year for instance (while the rate was 4.875), that the principal payment was actually larger than the interest payment. This should not have happened until year 18 or so.I guess I have been on the lucky side of the ARM mortgage (FHA), because the maximum adjustment is only one percent per year. The highest rate has only been 6.875 during the life of the loan.

It is important to note that the interest rate would need to be out in the stratosphere to have such an advantage with the one time payment, which led me to the second mortgage scenario.

Charles and myself have, going on five years now, emphasized that prepaying the principal to the second mortgage to eliminate the loan is more beneficial than applying principal to the first. If one were to retire the second mortgage, then they are left with only the first, and housing payments would actually decrease.

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Charles and myself have, going on five years now, emphasized that prepaying the principal to the second mortgage to eliminate the loan is more beneficial than applying principal to the first. If one were to retire the second mortgage, then they are left with only the first, and housing payments would actually decrease.
I think we are all on the same page now.

BTW- I am doing exactly what you guys mentioned. I have a primary note of 4.875 and a piggyback at 7.125% from a purchase in 2005. Just made a $12,000 payment to the piggyback note two weeks ago and doubled the automatic monthly payment amount for that loan. The amortization just changed dramatically. Sure feels good. My wife and I have the goal to pay the second off in 24 months. Pretty aggressive, but at this point we are DINKs (dual income no kids) so now's the time to build equity while we have it. And since homes prices have remained steady since the purchase was made over two years ago, equity is only being built through payments and not appreciation :?.

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