46
votes
What does "not touching the principal" actually mean?
"Not touching the principal" simply means that you leave the principal amount of the trust fund alone and only draw off the interest or dividends it accrues.
So, let's say you inherit $10 ...
- 5,390
30
votes
What does "not touching the principal" actually mean?
There are four problems with your logic.
First, interest rates are low now but they haven't always been. And you get more interest with "locked in" savings like CDs. So what you see offered ...
- 13.4k
16
votes
What does "not touching the principal" actually mean?
You are quite wrong in your stock market example. Let's say I have $1 million invested, and since I am not an active investor, the money is in mutual funds. So my principal is $1 million. In an ...
- 11.2k
12
votes
What does "not touching the principal" actually mean?
Another example is rise in stock market price - but that does not make sense either. If one has 10 shares of company XXX, even if XXX stock price doubles every year one would still have to sell shares ...
- 625
12
votes
What does "not touching the principal" actually mean?
In such a situation, someone’s talking about not reducing the starting total value. If an investment appreciates, then you sell some of it, you may still maintain at least the same base value you ...
- 397
10
votes
What about paying extra principal on a weekly basis?
Most mortgages (in the US) accrue interest on a monthly basis, and in that case it doesn't matter on what day(s) you make your payment. 4 times per month or once per month will be identical if the ...
- 47.3k
9
votes
How much share should I get in our property
First, congratulations on the nice capital gain. (From now on, every time someone asks on here "What to invest in?!" I will send them to this question!)
The three of you need to - literally ...
- 13.9k
9
votes
How much share should I get in our property
You need a neutral outside expert who will look at all the numbers, and then render a decision with all the numbers explained. The three current owners will have to agree that the split the expert ...
- 145k
8
votes
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
It depends on how the loan is set up and the lender's policy towards early payments. If the loan is set up with a monthly payment then the payment amount can be computed based on that formula where n=...
- 142k
7
votes
Making large payment on Mortgage not lowering maturity date
tl;dr: if you see your loan balance has decreased by the amount of the additional payment, then your additional payments are working as intended. Don't worry if the maturity date is unchanged.
You ...
- 38k
6
votes
Do extra mortgage payments typically go directly towards principal?
In your title you ask what happens typically. In the body of the question you ask if you have to specify how the extra payment will be treated.
The answer is you have to ask your lender about your ...
- 145k
5
votes
Accepted
Calculating amortisation payment amount, where first payment date differs from loan start date
I calculated 14098.64 and 14098.74. Here are the methods.
First, what I would say is more mathematically correct.
For a loan with equal payment periods we have the standard formula below.
pv = ...
- 10.1k
5
votes
Accepted
Credit Card Amortization via Principal-Only Payments
Credit cards don’t have fixed monthly payments like a mortgage or other traditional loan. As a result, there isn’t really a distinction between “principal-only” payments vs. future pre-payment as ...
- 116k
5
votes
Credit Card Amortization via Principal-Only Payments
Outside of any payment plan that might be set up, credit cards don't amortize - they charge interest on the unpaid balance at the end of the month, without regard for previous months, and then add ...
- 5,107
5
votes
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
Payment = [P*(r / n)(1 + r / n)^nt] / [(1 + r / n)^n*t - 1]
where n = 12, P is the loan, and r is the interest rate.
If the periodic rate is given as r / n with n = 12 months, this implies that the ...
- 10.1k
4
votes
Do extra mortgage payments typically go directly towards principal?
Mortgage rules differ by country, and within a country they further differ by the lender.
Assuming this is in the US, and based on my limited experience (2 mortgages), you can only add extra payment ...
- 3,148
4
votes
Additional mortgage payments don't automatically go toward principal?
It depends on the loan contract if this is even possible, and also if it is the default.
Banks of course prefer to use those extra payments against ‘future payments’, meaning you are giving them ...
- 38k
3
votes
What about paying extra principal on a weekly basis?
As others have noted, mortgage interest usually accrues monthly, so this would make no difference at all.
Even if the interest accrues daily or weekly, it would make only a modest difference. If your ...
- 22.9k
3
votes
What about paying extra principal on a weekly basis?
For most regular mortgages, pay a week or two early or pay up to the day before a late fee, and there is no difference in accrued interest.
Most banks will not accept partial payments, but will put ...
3
votes
What about paying extra principal on a weekly basis?
Ask the mortgage company.
Some people do this. If you do this you will be making 13 monthly payments a year. If they credit is correctly that will shorten the length of the mortgage and save you ...
- 145k
3
votes
Calculating amortisation payment amount, where first payment date differs from loan start date
For the first month, it is for additional interest of Feb. For 19 days divided by 365 we get int of 791.23. Add this to Principal of 160,000. On this principal multiply by rate and divide by 12.
The ...
- 57.2k
3
votes
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
A mortgage is normally calculated based on monthly payments, that is, 12 payments a year. If you get biweekly payments, that is 26 payments a year. Usually each payment is half the monthly payment.
So ...
- 22.9k
2
votes
Additional mortgage payments don't automatically go toward principal?
You may need to specifically state that your extra payments should go towards principal, and should not be considered early payments of future months.
- 61
2
votes
Principal Residence & no gifting tax = loophole? (Canada)
Anyone considering this approach needs to talk to a lawyer before going ahead; certainly, you don't want to trust anything I say as legal advice as I have no legal training.
This is not a gift. All ...
- 14.1k
2
votes
Bonds: Is "principal" a synonym of "face value"?
$950 would be the Price of the Bond that you got it at a discount.
$1000 would be the Principal / Face value ... that would be used to calculate the interest.
- 329
2
votes
Bonds: Is "principal" a synonym of "face value"?
The principal for a vanilla coupon-paying bond is $1,000 regardless of how much you paid for it. There are some bonds that will have a lower principal value at the beginning and accrue principal ...
- 142k
2
votes
Do extra mortgage payments typically go directly towards principal?
It depends on your mortgage company, and how they've set up their web site**. If you happen to be with Bank of America, when you make a payment, you'll be given an option to include an extra amount. ...
- 11.2k
2
votes
Do extra mortgage payments typically go directly towards principal?
You'll have to read your mortgage contract and/or ask the mortgage company.
Let's say you have a 30 year mortgage with fixed interest rate, and you are supposed to pay $1,000 every month. This month ...
- 23.9k
2
votes
Making large payment on Mortgage not lowering maturity date
I suspect that they're showing the maturity date as it is specified in the original mortgage, because 1) that's a legal document; and 2) it's easier to code their web site that way, rather than ...
- 11.2k
2
votes
Accepted
How much share should I get in our property
There are many different cash flows involved here— both positive (ie. capital gains) and negative (ie. rent due from each person that lived in the house, and paid to all those with an ownership ...
- 136
Only top scored, non community-wiki answers of a minimum length are eligible