Great Loan Calculator

[NickfromWI]

If you have a loan, but don't really understand how it works and affects you, check out http://www.jeacle.ie/mortgage/ Just slide the bars around to the right spot and it shows how long it'll take to pay the loan, how much of it is going to interest, and a few more interesting things.

I showed this to my sister and it motivated her to refinance her car loan. In 24 hours she went from 18.99 % APR down to 7.25%, after seeing what she was actually dealing with.

Just thought I'd share.

love
nick

 

[Frans]

Interesting, thanks

 

[NeTree]

You'd be surprised how much money you can save just by paying your mortgage bi-weekly instead of monthly.

 

[SkwerI]

Or just round your mortgage payment up by $50 or $100 every month. Most mortgagers will automatically apply the extra towards principal. My current mortgage is less than 3 years old (I refinanced to buy my first bucket truck) and I've knocked an extra 18 months off my mortgage already by paying a little extra every month.

 

[Burnham]

Or just round your mortgage payment up by $50 or $100 every month. Most mortgagers will automatically apply the extra towards principal. My current mortgage is less than 3 years old (I refinanced to buy my first bucket truck) and I've knocked an extra 18 months off my mortgage already by paying a little extra every month.

You are soooo right, Brian.

We've talked about this before...my wife and I took out a longer term mortgage than we needed to so as to put the required monthly payment as low as possible...lower than we needed it to be to afford it. Then we made double or triple monthly payments as often as possible, knowing that if we had a month when we couldn't do so it was no problem, like it would have been if we'd chosen a shorter term loan with a higher required monthly payment.

Took us 42 months to pay off a 30 year mortgage. Saved ourselves many tens of thousands of $$ in interest. Best investment return I have made, by a good margin.

 

[MasterBlaster]

That's awesome, B. More people need to do that!

 

[Burnham]

That's awesome, B. More people need to do that!

Thanks, Butch. I'm rather proud of it...and I thunk it up all mybyself!

 

[sotc]

that is awesome, lost 318 paymnets!!

 

[Burnham]

that is awesome, lost 318 paymnets!!

Well...not exactly...remember, we paid double or triple on almost all of those 42 months 'til we paid it off. Still, the difference in both total outlay of $$ and the time you labor under the weight of your loan is stunning.

The way mortgages work is that in the front end of the term, almost all the monthly payment goes to serviceing the interest, very little pays down the principal. It's only after you get deep into the term that the ratio begins to shift towards a higher percentage of the monthly payment being applied against the principal, as the principal shrinks...that's what you are paying interest on, the balance of the principal.

Squerlie alluded to this. When you pay over and above your monthly mortgage bill, every extra penny is applied to the principal only. The faster the principal shrinks, the more of the monthly eats at it sooner...it all adds up to major savings.

Of course, it works this way with those equipment loans some of you have to service...if you have a good month, you will be wise to put some of the gravy into extra payments on those loans.

Just make sure some nasty penalty against early payment of loan is not hidden in your paperwork...something that you should have done before signing the loan agreement in the first place, to be sure. Never borrow money under that condition.

 

[sotc]

good point but still 42 months times 3 payments a month is still 126 payments as opposed to 360, waaaay awesome!

 

[Burnham]

I cannot argue with that, Willie. It truly is...and there is no greater feeling than knowing your home and land is paid for free and clear.

 

[sotc]

or no worse feeling than relizing your still renting it from the government annually not to downplay how cool it would be to "own" my stuff outright!!

 

[Paul B]

Very good stuff Burn, we just got our first mortgage last fall, payments are affordable but if we can throw some extra against it, we shall. Less than 4 years to pay out a mortgage? thats some HUGE discipline and good money management for sure!

 

[Koa Man]

I have paid an extra $445 a month on my mortgage since I refinanced in 2005 at 5.5% 30 year fixed. Still got a long way to go.

 

[Burnham]

or no worse feeling than relizing your still renting it from the government annually not to downplay how cool it would be to "own" my stuff outright!!

This too is true, Willie. I haven't figured out a way to work around that end of the deal.

 

[Burnham]

I have paid an extra $445 a month on my mortgage since I refinanced in 2005 at 5.5% 30 year fixed. Still got a long way to go.

Sure, but you are doing it right, and making yourself more money with that $445 each month than you would with almost any other investment, regardless of risk...and there is no risk in this deal.

I expect there is a large differential in the size of your current mortgage and the one my wife and I took out in 1988 and retired so quickly, Wes. The interest rate was quite a bit higher though...if I recall correctly it was a smidge north of 9%. Home building prices have grown, of course, and we had saved a substantial amount of cash to use building the house, too. So we weren't borrowing anything like the 6 figures most folks need to get a house built today.

Most people won't be in the position to get a mortgage paid off as fast as we did, but the general concept is totally solid, and the more you owe at the start, the greater your potential savings are.

 

[Tom Dunlap]

That's a great link, thanks Nick!

Pre-payment fines like Burnham mentioned can kill you if you aren't aware of them too. make sure that the mortgage company applies the extra amount to the principle and not stash it in an escrow account of their own...non-interest bearing most likely.

Pre-payment saves money on interest but in some combinations can cost you more in tax deductions. Having a home mortgage interest as a tax deduction is a way to 'make' money too.

Be sure to ask your CPA for advice before getting too involved. One year I was told to not pre-pay for a reason that I can't remember.

 

[Burnham]

You make a valid point, Tom Dunlap. To a great degree it can come down to your tolerance of risk, in my view.

Do you feel comfortable enough in your ability to never fail to be able to continue earning enough income to service your mortgage debt? If one ever lays awake at night concerned about the possibility of loosing your home if you get laid off or can't work due to a serious injury or illness, then getting rid of that debt may well be worth a lot to you...more than a deduction.

You all may think that since I'm a federal employee, I'm immune to concerns like that...well, please think again. Twice in the last 8 years I have had my job abolished out from under me due to funding shortages, and there was a very real possibility that to retain my employment status I'd have to take a directed re-assignment to somewhere, anywhere that the FS could find a place to put me. Now I am not going to relocate away from my home, my wife has a good job that she enjoys, also FS, so my only real choice could well have been to resign.

Luckily for me, that didn't happen, I did find a local position to be reassigned into, both times...but for many FS folks that was not the case during those years.

I was really glad that we had our place paid for then...I was never concerned that if I did have to look for alternate employment, and loose a big chunk of my potential pension, I'd not have to worry about loosing our home and acreage too.

 

[squisher]

Ahhh you government guys got er made

I have a substantial mortgage but it's on three homes. Two of which are rentals a whole other way to make money.

 

[Burnham]

Ahhh you government guys got er made .

I do have a cool job, at decent pay with a great benefit package...I indeed got er made

I have a substantial mortgage but it's on three homes. Two of which are rentals a whole other way to make money.

In my book, dealing with those rentals are a whole other way to be driven crazy...near as bad a owning a gas station or some such .

 

[squisher]

Trust me not nearly. The rentals are a cakewalk. I run my rentals the same way I'm running my tree business by being fair. I'm not out to rip anyone off and in return all I ask is to look after the place as if it's their own and pay their rent.

I have long term renters in both places who consider these rentals as homes. I'm kind of young and have no plans on selling or changing the status quo, I just sit back and watch their value grow.

My version of part of a pension fund.

 

[Burnham]

Having good people in your rentals on a long term basis is surely the key to it. I have a friend who has not been able to find a stable situation like you for his rental house...frequent pain in the behind.

Git 'er done, Squish. I think you and your wife are awesome folks. Best of life to you!