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65 votes

Does paying a mortgage early mean you effectively paid a much higher interest rate?

I see your confusion: You're looking at the interest as if it applied to the whole loan balance. That's not what actually happens--the interest rate remains the same but as you pay down the loan the ...
Loren Pechtel's user avatar
51 votes
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Does paying a mortgage early mean you effectively paid a much higher interest rate?

Your first sentence is written in a way that highlights a common misconception about how term loans work: Most mortgages use an amortization schedule that have you pay more interest than principal ...
TTT's user avatar
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40 votes
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First time buyer- How to decide how much to put toward a deposit?

As much as you can reasonably afford As long as you still have an emergency fund(which you noted you will have) then its always a good idea to put down as much as you can afford for the deposit. ...
GamerGypps's user avatar
39 votes
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What incentives do banks have to gather up loans into pools (backed by Ginnie Mae)and selling them?

Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/...
JTP - Apologise to Monica's user avatar
38 votes
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Going house hunting next week and my credit score just dropped by 100+ points

Each of the recent changes you listed has the following effect on your credit score: $4K on credit line: increases your debt utilization. The smaller the denominator (sum of all credit limits of CC's ...
TTT's user avatar
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32 votes
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How do you figure out if a mortgage interest rate is reasonable?

To quote the poet Robinson... You better shop around. Talk to a few other banks and brokers, tell them what rate you want, and if they can't get it don't bother applying. However, online "rates" are ...
D Stanley's user avatar
  • 138k
30 votes
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Is there a strong correlation between credit score and mortgage rate in the US?

Criteria is not consistent between lenders, so it's not some set figure, but aggregated data is available to show the impact that credit score can have. From myFICO's Loan Savings Calculator: This is ...
Hart CO's user avatar
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20 votes
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Refinancing immediately after closing on a house purchase

I would ask her to be certain, but it should not hurt your loan officer. The loan officer gets rewarded for originating the loan. There is no penalty for them if a loan is prepaid that I have ever ...
D Stanley's user avatar
  • 138k
18 votes

Mortgage refinancing fees

tl;dr: I think you can find a much better deal. Doing a strait refi will cost you some amount of money. However, a 2.5% fee ont top of closing costs seems really high. You can get a quote from ...
Pete B.'s user avatar
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18 votes

First time home buyer - Need suggestions and views on few things

Wow, you are in an excellent situation. If it was me here is what I would do: 0) I would only buy if I plan to stay in that location for about 5 years. If you are planning to move, then renting is ...
Pete B.'s user avatar
  • 76.9k
18 votes

Does paying a mortgage early mean you effectively paid a much higher interest rate?

It is not so much that you are miscalculating, but that what you are calculating is not meaningful in the context you're trying to use it ("the annual rate of the loan"). You are essentially trying to ...
TripeHound's user avatar
  • 9,168
17 votes

Paying extra on a mortgage. How much can I save?

Can I pay $12,000 extra once a year or $1000 every month - which option is better? Depends when. If you mean 12K now vs 1K a month over the next 12 months, repeating this each year, now wins. If you ...
Lan's user avatar
  • 2,680
16 votes

First time buyer- How to decide how much to put toward a deposit?

The question you really need to answer is: What else could I do with the money? Consider that you may need to furnish the house, or you may want to improve or remodel it, and you should reserve some ...
Mohair's user avatar
  • 1,020
15 votes

Going house hunting next week and my credit score just dropped by 100+ points

Unfortunately, you've committed a bit of a home-buying blunder. Large new lines of credit close to home purchase are not advised. New lines of credit after an offer has been accepted have caused many ...
Hart CO's user avatar
  • 70.6k
15 votes

First time buyer- How to decide how much to put toward a deposit?

Well besides that usually the money percentage you put down influences the interest rate (the more you put down the cheaper interest you get) you should consider the opportunity cost. This means if ...
Thomas 's user avatar
  • 1,021
10 votes

Refinancing immediately after closing on a house purchase

This contradicts the other answer so I think it's worth mentioning: I believe different companies have different pay structures and the only way you can know for sure is by asking your loan officer. ...
TTT's user avatar
  • 47.2k
10 votes
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Can one get a house mortgage without buying a house?

I've never heard of a loan product like that. Yes, if they keep the funds in an account, it is no risk to the bank, but they would essentially need to go through the loan process twice for the same ...
Ben Miller's user avatar
  • 116k
9 votes
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Why did the change in average real mortgage rates in 1973-74 and 1983-84 swing so wildly?

1973 was the first year of the oil crisis. Inflation increased radically, so inflation adjusted rates went negative. Mortgage rates adjusted once they realized that the new inflation wasn't a ...
Brythan's user avatar
  • 21k
9 votes

Can one get a house mortgage without buying a house?

As a legal contract, a mortgage is a form of secured debt. In the case of a mortgage, the debt is secured using the property asset as collateral. So "no", there is no such thing as a mortgage ...
not-nick's user avatar
  • 6,420
9 votes

What does it mean when 5 year fixed is lower than 5 year variable

What does this indicate about rate prediction over the next few years? It indicates that the market believes that the near-term interest rate will drop below 2.89% (to bring the average down from 3....
D Stanley's user avatar
  • 138k
9 votes
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Mortgage brokers - should I expect to get a better deal than I can find myself?

You have not necessarily spoken to a bad mortgage adviser. Lenders have two main channels to the market – direct, and intermediary (through a range of different kinds of advisers). Some lenders ...
marktristan's user avatar
  • 3,710
8 votes

First time home buyer - Need suggestions and views on few things

I often use the cliche "don't let the tax tail wag the investing dog." In this case it's the house dog. If the tax consideration is enough to sway your decision either way, you need to sit down and re-...
JTP - Apologise to Monica's user avatar
8 votes

Mortgage refinancing fees

tl;dr: I agree with Pete B.'s assertion that you should continue shopping. That's not the whole story though; there are other factors that can raise your rate, and affect your closing costs. The ...
TTT's user avatar
  • 47.2k
8 votes
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What's the incentive to offer consumers loans with negative interest?

It sounds strange, but is partially a matter of idiosyncratic terminology. There are three components to what you pay for a Danish morgage: Repayments of principal. "Interest", which is forwarded to ...
hmakholm left over Monica's user avatar
7 votes

Mortgage refinancing fees

2.5%? Whoa, you are being robbed there. Straight-up, stripped-down, and bent-over-a-table robbed. Never agree to "fees". If they don't want to do the work to give you a loan, there are other ...
Michael Lorton's user avatar
7 votes

Going house hunting next week and my credit score just dropped by 100+ points

Will this come up during the underwriting? Yes. You will have to disclose all of your liabilities when you make the loan application. Is the score I got PQ for locked in? It depends on the lender....
CactusCake's user avatar
  • 3,463
7 votes
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Is it beneficial to pay mortgage points if I have high income in the year I am starting a mortgage?

The general consensus on paying points to lower your mortgage interest rate is that it's a bad idea. The reason is that it takes a while to break even, say 5-10 years before it was worth it to do so. ...
TTT's user avatar
  • 47.2k
6 votes

First time home buyer - Need suggestions and views on few things

I see that you have considered the value of the tax deductions Presumably you are in a area with fairly low property taxes. Another thing to consider is that when you sell, as long as you use any ...
JimmyJames's user avatar
  • 3,888
6 votes

Mortgage vs cash for a first-time home buyer

A single person making 6 figures is in the 24% tax bracket, a taxable income over $82,500. This means a 3.125% interest rate costs you a net 2.375%*. This is less than long term inflation. I ...
JTP - Apologise to Monica's user avatar
6 votes

Does paying a mortgage early mean you effectively paid a much higher interest rate?

As long as there is no prepayment penalty, and there are no tricks like counting the effect on the rate due to “points” being charged, the rate is the rate. 4.5% is the same through the day you pay it ...
JTP - Apologise to Monica's user avatar

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