Real Estate Investing - Mortgage question

Author

Mortgage question

l0200100@yahoo.com

2006-08-23, 5:25 pm

Hi, I have a very stupid question but I am very new to real estate, so
forgive me.

Lets say I get a 30 year mortgage for $100,000 and my monthly payment
is $1,000

Then lets say one month later I suddenly want to pay off the entire
$100,000 mortgage at once. Which of the following amounts do I end up
paying?

A) $100,000 + closing costs + interest for 1 month
or
B) $100,000 + closing costs + interest for 30 years
or
C) Other?

Thanks in advance.

Javier

2006-08-23, 8:25 pm

Depends on how your loan (aka "The Note") was written. However, be
assured that no bank will make you pay 30 years of interest if you have
not held the loan for 30 years, it would be called loan sharking.

However, you may have to pay a pre-payment penalty. Depending on the
loan, some banks will charge about 1-5% penalty if you pay the loan off
prior to the first few years. It's all in the loan docs. They do this
in exchange for lower interest rates and points. Basically, the bank
will make money up front in points, in the long-run in interest, or
somewhere in between with pre-payment penalty.

--Javier
http://www.InRealEstateSolutions.co...Properties.html

On 2006-08-23 17:36:34 -0400, l0200100@yahoo.com said:

>
> Hi, I have a very stupid question but I am very new to real estate, so
> forgive me.
>
>
> Lets say I get a 30 year mortgage for $100,000 and my monthly payment
> is $1,000
>
> Then lets say one month later I suddenly want to pay off the entire
> $100,000 mortgage at once. Which of the following amounts do I end up
> paying?
>
>
> A) $100,000 + closing costs + interest for 1 month
> or
> B) $100,000 + closing costs + interest for 30 years
> or
> C) Other?
>
>
>
> Thanks in advance.

Grover C. McCoury III

2006-08-24, 9:25 am

You will be required to payoff the remaining loan balance plus interest. Assuming you made your last payment, you will be required to pay interest from the beginning of the month to the day you close. You may also have to pay a prepayment penalty to the lender.

Whenever you apply for a mortgage ask if the loan features a "prepayment penalty". Many loans require the borrower to make a minimum number of payments to the lender - if the borrower decides to sell or refinance the home before the minimum time period denoted in the loan documents the borrower will be required to pay a penalty to the lender. Prepayment penalties insure that the lender will get a minimum rate of return on their investment. There are two types of prepayment penalties as follows:

1) Requirement to pay a penalty if you sell *or* refinance before minimum period (commonly referred to as a "hard" prepayment penalty)

2) Requirement to pay a penalty if you refinance before minimum period (commonly referred to as a "soft" prepayment penalty)

Prepayment penalties can range from 6 months interest to a percentage of the remaining loan balance.

Yet another $.02 from a Real Estate Investor and Licensed Mortgage Broker @ http://www.GroverMcCoury.com

<l0200100@yahoo.com> wrote in message news:1156368994.186832.22730@p79g2000cwp.googlegroups.com...
>
> Hi, I have a very stupid question but I am very new to real estate, so
> forgive me.
>
>
> Lets say I get a 30 year mortgage for $100,000 and my monthly payment
> is $1,000
>
> Then lets say one month later I suddenly want to pay off the entire
> $100,000 mortgage at once. Which of the following amounts do I end up
> paying?
>
>
> A) $100,000 + closing costs + interest for 1 month
> or
> B) $100,000 + closing costs + interest for 30 years
> or
> C) Other?
>
>
>
> Thanks in advance.

1031store

2006-09-04, 9:55 pm

Here's a mortgage calculation for you...
1000 payment a month mortgage

You would pay off the principal balance of your mortgage ~$99970 plus any intrest accrued on days after the first of the month (remember mortgage payments are paid after the interest has occurred).

There generally aren't prepayment penalties on 30 yr fixed mortgages, but in the instance that you pay the balance down more than 20% in the first 3 years... there can be.

That prepayment penalty can range, but a good rule of thumb can be 6 months of interest.

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