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insomniafun4me | I just currently own a $250,000 home and have a 30 year mortgage fixed at 6.25%. Can I pay off all of it now? |
I am in my fourth year of the mortgage, but have just received a lump sum of money through a will of my late grandfather. It is enough to pay off the house in full right now, and I want to do this with it. Can this be done? Will the bank allow this? |
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paintedhorse30
 |
You should be able to with a few fees added. DO it if you can...I would. Your bank can tell you what the exact payoff is. |
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Scott B
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You can payoff a loan at anytime. Unless you have a subprime loan, you should be past any prepayment penalty, they are usually within the first 2 years.
Pay it off and have a mortgage burning party! |
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JewelFine
|
Sorry to hear about your late grandfather.
The best thing to do is to contact the bank your mortgage is with. It depends on the mortgage you signed. Some allow you to pay all the principal off at any time. Some mortgages only allow you to pay a percentage each year towards the mortgage (i.e. 10% per year). Others will allow you to pay it off but you will have penalties. So it may be best to wait until it is time to renegotiate.
But having your mortgage paid off is really great and it is amazing how quickly you can save money if you aren't paying mortgage or rent payments each month.
Good Luck,
Melanie Fine, CPA
http://www.transformyourmoney.com |
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lepr0kan
|
The easiest way to find this out is to call the mortgage company and ask for a payoff amount. Also ask if there is a prepayment penalty. If no penalty then you are free to payoff whenever you want if there is a penalty they will let you know how much it would be and how long there is a penalty (usually when there is one it's that the loan can't be paid off before 3-5 yrs). You could also check your truth in lending or note from the original closing but you may not want to take the time to dig up such docs. |
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Vince M
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Your mortgage contract should contain all the information of the costs you may incur by making an early pay off of the principle amount.
Almost certainly, whatever fees may be involved will be a LOT less than the remaining 26 years worth of interest.
Keep in mind, however, the tax breaks you recieve on the interest you pay the lender. At this, early, stage of the loan, most of your payments go toward the INTEREST on the amortized loan, and this interest can be deducted from your taxable income. Make an appointment with your tax preparer, to see if this deduction is large enough to make it worthwhile to keep the mortgage. For many people, the tax benefit outweighs the interest costs.
Keep in mind what the TAX cost will be on your lump sum receipt. It may be better if you make your mortgage pay off NEXT year. Again, check with your accountant or tax preparer. |
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Worldly25
|
This is not the wisest choice for spending your inheritance. You should invest it with a financial manager or talk to someone from Fidelity or Schwab. No load mutual funds are a good deal. Then your inheritance will grow. Just add a extra 100 to 200.00 dollars to each mortgage payment. This goes against the principal and you can have it paid off in 15 years, saving a fortune in interest. Also keeping the inheritance for an emergency fund |
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stan c
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If you pay it off but have no money for emergency, then you're jumping the gun. Request an amortization that will give you a break down between interest/principle. On the first 15 years, you pay about 70% in interest. |
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SG
|
I have to agree that this is not the best use of your money. Some sort of Index funds or a Roth IRA would be a much better use of your money over the long term. This is a substantial sum of money, and since I'm assuming you're young this could set you up for a real nice retirement.
Long term speaking, the 6.25% is a fairly low rate, and if you're in a position where you should be itemizing your deductions the effective rate is even lower.
My advice, start researching how to invest your money.
That said, you can usually pay off the whole mortgage at once, especially with a long term fixed like yours. Just check with your lender to see how to do it. You may have to fill out some paperwork. |
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Arsh S
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I would pay off most of it. Keep some money aside as a emergency fund. and invest some money. |
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v b
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Check your mortgage papers. There are some loans that limit you to paying no more than, say, 1/5th of the principal per year.... (They charge a penalty that effectively raises your interest rate.) |
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Steve R
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You can pay it off but what if you have an emergency? You should have at least 6 months of expenses in a savings account in case of loss of job, major car repair, health problem, etc. Have you funded your Roth IRA? It's important to fund your future retirement as well. |
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iceman
 |
Of course. People do it all the time.
Dont be surpised if you get a call from bank and have them question it though. Obviously they want to keep the account open, and the juice flowing as long as possible. But legally, you are 100% allowed to do it. |
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