80-10-10 Home Mortgage

S

Stuck_At_Work

1,000+ Posts
I put 10% down on my house and took two loans (10% and 80%). I've been paying off the smaller loan at an accelerated rate and I'm a couple months from paying it off. What occurs at that point?
 
In my understanding, you were never paying pmi to begin with. I have a similar loan and i am actually making 2 separate payments. Your payment will just be reduced by the amount of the smaller 10%. If I were in your shoes, just keep making the same payment you were but put it toward the principal on the 80%. Or, if your rate on the 80% is above 6% interest, refinance to a 15 or even 10 year loan probably at the same total payment. You might want to have a professional run some numbers to see what would work best for your situation as far as getting the principal payed down faster.
 
Yeah, DEFINITELY keeping sending the same amount of cash out each month - that extra payment on the larger/longer loan will pay off HUGE. Heck, that's probably better than $100 a month you're freeing up ($150 on my 15% loan) - that'd be $1200+ a year, probably a full extra payment, which knocks 7 years off a 30 year note. The math is incredibel.

Owing your house outright means you can live on FAR less money per year than someone with a house payment. My family has friends that live very, very well for themselves on about 50k a year, TOTAL GROSS, and they have kids, etc. They own their house.
 
I don't pay PMI. My 10% loan is at 7.8% APY which is why I've been paying it off as quickly as I can. My goal was to pay it off in 3 years and I'll end up being about 1 month short of that. Not too bad.

My 80% loan is at 5.6% APY and I'm not as motivated to pay it off.

I plan on using the extra cash for investments....
 
nothing happens. you just don't have a 2nd lien payment any longer. Make sure you receive (and keep) a copy of your notarized release of lien and make sure its filed correctly with the county clerk's office.

as far as investing the money, if you can knock 10 years off of your 1st lien mortgage, how would that savings compare to earnings from investments? remember that it builds upon itself - the more principal you pay down, the less interest is accrued monthly, so more of your payment goes to paying down principal. Its as safe of an investment as you can get.

poster above is correct - owning outright really makes your money go far.
 
Oh yeah, one other thing you could do: divide up the extra cash between your mortgage and investments.

This should recude your mortgage payment by a few years (an effective hedge against long-term market risk).

One final note: you might be able to refinance at a lower locked rate in the next few months. Keep an eye out.
 
most times, they are not filed. just notarized and sent to you. if it were filed, there would be a stamp from the clerks office with the book and page where it is filed. you likely need to go to the office and file it yourself. it may help if you have your recorded note and deed of trust from when you closed (i think the title company sends it to you after recording, but not sure).

but always keep that release so when its time to sell the house, if the title is messed up and still shows that second lien on there, you have proof to offer the title company that it is no longer valid. saves a lot of headache trying to get a copy from the lender years after the fact (if that lender is still in business. looking at you, bear stearns but there are sure to be others folded or consolidated before the current mess is over).
 
and just to pile on to eurohorn, from a cash flow perspective, wouldn't you rather your $15,000 allow you to free up $200 per month after a few years? unless you can recast your first lien, you have not reduced your payment at all. just your note length.
 
UPDATE... I just got a confirmation e-mail from CitiMortgage that my loan was succesfully paid off. Wahoo!

So to summarize the thread:

Citi should be sending me a copy of my notarized release of lien. They may or may not file it correctly with the county clerk's office. If it is correctly filed, I will notice the county clerk's stamp with the book and page where it was filed. Otherwise, I will need to go to the office myself and file it. If I do so, I should bring a my note and deed of trust from when I closed.

Great advice HornFans. It is times like this when I really appreciate the collective body of knowledge I can find here.
 
good job SaW, I am in same boat just 1 year into the same 3 year plan. I assume you have 3 months of living expenses saved up in a safe decent interest earning account somewhere. My plan afterward is probably to continue paying off the 1st note until I can refinance at a 15 year and have same payment as the current 30 year note. that will probably take another 3 years depending on interest rates. my 1st note is 6.25%.
 
sounds good. be sure to keep the release along with all documentation from the clerk's office somewhere safe in case that lien pops up on a title commitment when you end up selling or refinancing the property. That way the title company can clean it up easily.
 
Here is the way I have always looked at pre-paying a mortgage:

Say you have a $100,000 mortgage and your payment is $600 (principle & interest) for 30 years. That means if you you will pay $216,000, if you made no extra payements towards the mortage. The avg. amount of principle paid monthly is $277.77 ($100,000 / 360 total paymnts), so for every $277.77 in extra payment(s) you make towards principle, you save and extra house payment with is $600. So if you paid an extra $50 per month over the life of the loan you would save over $32,000.
 
True, but if you invested $50 per month over the life of a 30 year loan (360 periods) you would wind up with potentially a lot more money - especially if you put it in something like an IRA where you don't have to pay taxes. This is especially true if you can average a good interest rate:

6% - $50,225
7% - $60,998
8% - $74,518
9% - $91,537
10% - $113,024
11% - $140,226
 
For those in the know. What about 15yr vs. 30 yr.? What if you had a 30yr note but, paid the 15yr amount? Does that work out to the same total cost, within reason?
 
You typically get a better interest rate for a 15yr mortgage... so you would save a lot of money by refinancing a 30 year mortgage into a 15 year mortgage if your plan is to pay it off in 15 years anyway.

And for those saying it doesn't make sense to pay-off a low interest mortgage... I'm not so sure I agree.

I have a pretty damn low interest rate on my 30 year mortgage (5.8%). Paying it off early means I am making a gauranteed 5.8% return on my money. I realize the market has done better than that on average over the last 20 years,. Call it a hunch, but I don't think the next 5 years will be as prosperous.... I think I feel more comfortable with the gauranteed 5.8%.
 
The only problem with refinancing is the closing costs. When I can afford it, I plan to get a Home Equity Loan(fixed rate) to pay off our mortgage. Even though rates have gone up recently, my credit union offers a Home Equity Loan rate of 5.49% with no closing costs. This online rate is good for a term of up to 10 years.

Recently before rates spiked it was 4.99%. You do have to pay one fee and that is for your appraisal. Other than that, unless you pay off the loan in the first two years, there are no fees. Check it out. Pentagon Federal Credit Union.
 
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