I hate my mortgage payment…

I guess hate is a strong word and I probably shouldn’t use it in this instance, but hey, what the hell.  We purchased a nice new home in April 2009 (got a great price since the market was pretty horrible at that point….see SPY for overall market tanking….not many people buying homes at a time when the market is at its lowest point in years) in North Carolina.  Now, due to a job change, we have relocated to the New York City area.  We currently have a renter occupying our home in North Carolina who is on a two year lease and a temporary corporate relocation from Japan.  Once the two year lease is up, we will either sell this home or continue to rent it out for corporate relocation services only.


Now, I don’t really hate my mortgage payment at this point, but I do wish it was lower and when you analyze how much interest you may pay over the life of the loan, it sort of makes you sick to your stomach.  Now granted, there are some benefits.  First, the home mortgage interest deduction for individual tax purposes is one of the best tax deductions out there.  What if the IRS (i.e. the government) took that away like they have threatened?  Well then one great reason to be a home owner is thrown out the door.  What about “the American dream of home ownership?”  For many people, this “dream” has become a “nightmare.”  Especially for those of you who purchased your home without a down payment (we were not one of these instances) and are now watching your home value go down.  I thought housing prices always went up (sarcastically…)?

Could renting really be better than buying right now?  I’ll leave that up to your own personal opinion and to the “experts” out there who claim to know what the hell they are taking about.

In any case, here are two interesting ways to (i) lower your monthly mortgage payment and (ii) payoff your mortgage sooner.

1)       Mortgage “recasting” or “re-amortization”:  This is something that I didn’t know too much about before reading THIS article from the NY Times.  It involves paying off a lump sum of the principal amount and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so your new monthly payments decrease slightly and you save on interest paid over the life of the loan.  Read the article for more details about this process and if it makes sense for you.

2)       Comparing bi-weekly payment plans with monthly payment plans:  At least once per month I get an email and letter via snail mail from my mortgage company stating that I could pay off my mortgage 4 years and 11 months sooner if I change to the bi-weekly payment plan.  Essentially, the plan’s biweekly debits result in 26 drafts per year, which is equivalent to 13 monthly payments.  The extra payment is applied directly to your principal balance.  As a result, you build equity faster and pay off your home loan quicker while saving on interest costs.  My initial reaction to each of these emails and snail mails are “what is the catch and why do you want me to do this so badly?”  I think the catch is that they charge a $375 processing fee, along with a $1.50 transaction fee per draft (26 per year).  This is extra revenue to the bank and since most home owners don’t stay in their homes forever, I guess they end up making more money and are able to collect your money faster so that they can put it to work for them.  My solution you ask?  Stick to paying monthly and simply send the bank a check in the amount of one month’s mortgage payment each year and ask them to apply the amount directly to principle.  This in effect will reduce your pay off timeline the same way a biweekly plan would….all without the fees!


Here are a couple nasty numbers for you to sample how much interest you will pay over the life of a $300,000 mortgage:

• $300,000 mortgage
• 30 year fixed
• 5% interest rate
• Total payments = $579,765.60
• Total interest paid = $279,765.60……………..yikes!

Here is a mortgage amortization schedule which will automatically calculate the amount of your monthly payments applied to principle and interest, for the life of the loan.  You can see my various “Forms” elsewhere on this site.

By the way….do you think you can afford a home in Harlem?  The average listing price in Harlem, NY for the week ended December 29^th was $690,911!  Now granted, this is much less than the average listing on the Upper West Side which was $1,906,981 for the same period.  Let’s compare all of this to Raleigh, NC which was $299,184, with the highest neighborhood average of $459,022 in the University area.  Source:  Trulia