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Hi
As I thought.
So Damap your not actually paying $50 per week off your principle only.
Your just paying a higher repayment amount and a portion of that extra is the $50 principle over payment.
What I am getting at is I didn't think you could just rock up to your bank and say I am going to give you $50
per week extra and I want you to take it off my principle.
The bank would take you extra $50 per week and a portion of it would be going to pay some extra principle and the
rest would go on interest repayment.
Richard
No matter how they are structured they simply cost a lot. Best thing I ever learned from a broker was overpay the principal even by $50 a week makes a huge difference over time to total interest. Assuming you aren't so leveraged you can't find 50 bucks a loan extra to pay :-)
You have lost me really.
A table mortgage is just that.
I think if you work it out they cost no more than anything else - for the same payments.
If you pay more than the minimum (as you suggest) you will reduce the term and hence the interest.
The 1st mortage I had was P&I 15 year term.
I worked out what I had to pay (excel will do it for you these days - or many of the online calculators) to pay it off in 10 years.
As suggested it meant that if I couldn't pay the enhanced payments I could revert to the 15 years.
But if I took out a 10year term I wouldn't have had the versatility.
Borrowing money costs!
The longer you borrow for the more it costs!
Table mortgages don't 'cost' more for the same term and interest rate as any other option.
What I am getting at is I didn't think you could just rock up to your bank and say I am going to give you $50
per week extra and I want you to take it off my principle.
The bank would take you extra $50 per week and a portion of it would be going to pay some extra principle and the
rest would go on interest repayment.
Richard
It should all come off the principle.
Otherwise they are charging you more for interest than you owe.
The way a table mortgage works is you pay a constant amount over the term of the loan.
The interest is calculated on the principle still owing,
this is taken out of the amount you paid,
the rest that your paid comes off the principle.
At the start the amount taken off the principle is very small
but as the principle reduces the interest reduces so the amount left after the interest payment increases
So the interest gets less and the principle reduction accelerates.
If you make any extra payments they must come off the principle.
Yes it all comes off the principal. You are already paying all the interest. LOC is way better but can be tempting for most people. I am happy to just over pay. I increase the overpayment as rents increase until I reach the 5% threshold.
Would you be better off taking that extra P payment and instead leveraging into another I.P?
Pay the loans off many years later by selling down - or never pay it off.
The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.
Not a rip off - they are what they are.
Pay a 'table' amount regularly and pay off the mortgage by the end of the term.
Cause they are a rip off ! Reducing mortgage is what you need if you hell-bent on paying
an investment mortgage off, sure going to lessen your cashflow but that is what you
are doing to a lesser degree on a table mortgage.
The old adage of buy 20 on interest only and let the magic of time do the work for you and sell
10 and pay other 10 off makes more logical sense to me. An more importantly you will have
more cashflow to live on over the years for a better quality of life, years you can never get back.
I know between the two examples who will have the bigger property portfolio over the same amount of time.
Cause they are a rip off ! Reducing mortgage is what you need if you hell-bent on paying
an investment mortgage off, sure going to lessen your cashflow but that is what you
are doing to a lesser degree on a table mortgage.
The old adage of buy 20 on interest only and let the magic of time do the work for you and sell
10 and pay other 10 off makes more logical sense to me. An more importantly you will have
more cashflow to live on over the years for a better quality of life, years you can never get back.
Now you are changing the context.
Your strategy is fine in some markets, crap in others.
But a table mortgage is still not a rip off, it is still what it is - a table mortgage.
Now you are changing the context.
Your strategy is fine in some markets, crap in others.
But a table mortgage is still not a rip off, it is still what it is - a table mortgage.
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