Mortgage Loans

[JM-AM]

You do not pay the same amount of interest every year. It gets lower ever year. If you paid the samr amount of interest it would take you 60-70 years to pay off your loan.

Itemizing deductions will not always be better then the standard deduction, it depends what you can itemize. Not everyone itemizes there tax returns.

With that being said I also agree you need a professional Tax advisor to determine what is best according to your own situation.

[MovingForward_2012]

Can you explain to me how a person pays less interest every year on a 30 yr fixed mortgage? My homebuyers class told me the principal and interest paid every month won't change. Am I missing something? If so, please elaborate. Perhaps, less APR but most folks don't even know the full cost to service the loan...I don't. All I know is that the amount I pay in interest and principal every month remains the same over the life of the loan.

The $3600 back from the IRS that I am expected to get every year is based on my unique income level, % interest on a particular home price over the life of the loan, and taxes paid. Each person will get a different amount back. My info came from my mortgage broker and I ran the numbers across my new loan officer after switching lenders and he agreed. I'll be sure to post my refund amount in April of 2014 (I will put a reminder on my phone )

My loan is costing me approx. double the purchase price; based on my loan paperwork, I will have paid over $600,000 after 30 years for $347,900 with 4.125% interest.

Please explain JM-AM why the amount I pay in interest is going to change when all the educational materials I have read say that the principal and interest paid each month will be the same over the life of a 30 yr fixed loan? I'm really confused.

Sorry for the typos in my previous post, I was falling asleep while typing last night.

[tshope4205]

Even fixed rate loans are amortized - which means  while you're payment doesn't change, the amount applied to interest vs principle changes with every payment.  In the beginning, much more is going toward interest than principle.  There are amortization calculators that will give you an estimate of how your monthly payment is applied every payment or year, that should give you a better illustration.

[Mike_B03]

The amount of interest you pay every month should change as the amount you owe on the loan deccreases. Paying 4.125% on $347,900 is going to be a lot different than paying 4/125% on $200,000. 

The amount that goes to principle should increase with every payment and the amount that goes towards interest should decrease, see this amortization calculator here: http://bretwhissel.net/cgi-bin/amortize

[MovingForward_2012]

Okay that makes sense now. Thank you. So each year, the amount I get back in tax refund will go down so my max refund will occur when I get my refund after 1 year? But it seems that the refund amount will be decreased gradually each year over the life of the loan.

[JM-AM]

Only other thing to add is your PMI or MIP depending on loan type also decreases as your principal gets lower.

[Mike_B03]

Honeslty you shouldn't get a refund, you should adjust your withholdings so that at the end of the year, you owe $0 and you get back $0. Wouldn't you rather have $300 per month in your pocket and use it as you need throughout the year vs letting the government borrow $3600 from you interest free? It is nice to get a big chunk like that back at once too though, because if you keep it monthly, it'll probably go to misc. things and you won't feel it as much.

[tooleman694]

Yup I love to get a very little refund at the end of the year. Means I maximized my income all year.

[MovingForward_2012]

Yes I thought about adjusting my withholdings as I understand Uncle Sam gets a interest free loan from me every year. But right now I can't change them as I am still on a payment plan to pay the IRS back taxes and they have frozen my withholdings; however, it will be fully paid off with this year's tax refund. I had planned on putting the refund money into savings each year and withdraw from it each month to drop my mortgage payment but it makes more sense to get $300 more a month a no refund. I think I will see what my refund will be after the first year and then adjust my withholdings as I will have the $3600 in savings from my 2013 tax refund and the extra $300 a month coming in starting Jan 2013 but we'll see as I might adjust my withholdings right after I pay my back taxes completely off in the spring of this year. I get a $6,000 bonus from my job every March that goes into savings and I also take $150 out of each paycheck every week for savings as well so it is always growing except for RIGHT NOW as the new car, earnest money, and Christmas has depleted it for the first time in 5 years but my 401K check is coming next week for $5,300 and my bonus of $6,000 is a month and a half away so I am not worried. I just feel naked right now with only $500 in savings right now...LOL! :-) But buying a house is a big expense and it could have been much worse if I didn't get a second mortgage for the downpayment and the builder to pay my closing costs.

[jwpezd]

When is this going into effect???? Is it match 31 or is that when they are making the announcement?