Mortgage Payoff Attempt (RANT)

[atgcpaul]

Escrow is separate - an amortization table calculates principal and interest. Your payment slips or statement should show escrow separately - but I think it is better not to escrow and pay the taxes, etc. yourself. For example, banks usually will pay the taxes when due - so you miss the early payment discount.

There are amortization calculators online, but it's simple to calculate in a spreadsheet:
1. Enter principal balance in cell A2
2. Enter interest rate in cell B2
3. Enter monthly payment in cell C2
4. Enter +(A2*B2/12) in cell D2 - that is your interest for one month
5. Enter +A2-D2 in cell E2 - that is the principal for the month
6. Enter A2-E2 in cell A3 - that is the new principal balance
7. Copy cells B2 through E2 to B3 through E3
8. Copy cells A3 through E3 to as many rows as needed - for example, rows 4 through 362 for a 30 year mortgage
9. Manually adjust the last payment to make the final balance zero.

Thanks. I will work that out in Excel. I was looking at the Citimortgage site and they have a link that will create an amortization schedule for you based on your current loan. I'll compare the numbers it gives me with the spreadsheet. I've been blissfully paying an extra $69.40/month so I'm expected to pay this off 20 months earlier. I've been debating how much to accelerate the payoff. We refinanced in 2011 so only 4 years in to this new loan and I can't see myself being in this area for another 10 years, but who knows. At the same time, it's less money we'll owe the bank when we sell. I've given up any notions that we'll make a profit or even break even on this property, though, unless we stay here until the mortgage is paid off.

I'm not sure if a mortgage holder always gets a choice on whether or not there will be an escrow account. On my first mortgage, the bank handled the taxes thru an escrow account and on my second house I paid the taxes directly. Perhaps it was a matter of being established with a mortgage history, but I really don't know.


CWS

Managing our own escrow wasn't an option. Our county also doesn't give us a discount for paying early. Citimortgage doesn't hold that much extra in reserve so it's not really an issue for me.

[mpc]

Depending on the state/county, escrow accounts may be required. Otherwise, mortgage brokers/banks often require them if the mortgage is for a house purchased with a down payment of under 20%... a lot of banks use under 20% down payments as a trigger point for buyers that might walk away from upside-down loans or if job situations change and they suddenly can't make payments. With >20% of a buyers own money into the property the banks feel there is less risk the buyer will bail on them. Many banks will also require private mortgage insurance (PMI) to cover themselves if the home buyer put less than 20% into the property and then will lump the PMI payment plus the required homeowners insurance plus property taxes into the escrow payments so they have a few months of "reserve" money to handle their expenses in the event the homeowner bails. At least that's how it was explained to me years ago. Some loan brokers/banks use 10% as the trigger instead of 20%. I have no idea what twists the rules can take when government backed loans are involved.

mpc

[woodturner]

I'm not sure if a mortgage holder always gets a choice on whether or not there will be an escrow account.

In my experience they do, but it may vary with state or locality. Some lenders want to charge a higher interest rate if they don't escrow. However, they will usually waive that fee with some pressure - and if they don't, choose a different lender.

[capncarl]

I like an escrow for the lender to take care of the taxes. My last 2 houses had escrow accounts and I never had a second though about the taxes, but now that I don't have an house loan ( �� that's a good feeling ��) I get to hear my wife whine about the taxes even though the money is set aside just to pay taxes.
IMO Pre-paying a mortgage payment is better than putting money into a 401. On this house I'm living in now I made extra payments every month and paid it off in 3 years. Then the extra money can go into a 401.
capncarl