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Early Lump Sum Payment Question

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jamesmail116 Joined: 08 May 2011 Posts: 1 1.45 Dollars($)	Posted: Sun May 08, 2011 7:37 pm    Post subject: Early Lump Sum Payment Question Like 0 Dislike 0 With a 30 year fixed rate mortgage, in a lump sum early payment will I have to pay off all the 30 yrs of interest associated with the loan, or only the remaining principal on the loan. For example on a $50k loan (possibly fha loan) assuming a 10k down payment let's say 5% apr. If I am paying $40k principal $40k in interest over the 30yrs. (This is an estimate I didnt do the math). Then luckily a month or two later I get a windfall of $1mil (yes!). Not including any fees associated with finalizing and assuming no prepayment penalties and my loan structure allows early payment. If I want to pay off the home am I paying $80k? or do I only pay the remaining principal?. If no is the answer on the fixed rate loan are their any other loan types that allow early payment to go straight to principal and ignore the remaining interest, or is the only benefit with lump sum early payment found in negating the compound 'interest upon interest' year after year? Answers from experience or Knowledge only plz no guesses
adonis Joined: 22 Oct 2005 Posts: 10562 Location: ALASKA 1089.18 Dollars($)	Posted: Sun May 08, 2011 10:18 pm    Post subject: Like 0 Dislike 0 Welcome jamesmail, As far as I know, if you pay off the loan through a lump sum payment, you may not be liable for paying the interest associated with it. You can pre-pay any loan irrespective of whether it is a fixed rate loan or an adjustable rate loan provided you are not liable for paying a pre-payment penalty. _________________ Procrastination is the enemy of your financial success
chrisgummerson Community Expert Joined: 29 Apr 2010 Posts: 704 Location: La Palma, CA 9.98 Dollars($)	Posted: Mon May 09, 2011 1:40 pm    Post subject: Like 0 Dislike 0 Adonis is correct. Your mortgage is paid in arrears, meaning January's interest is paid in February. If your principle is lets say 80k on your statement, provided you dont have a "Pre Payment Penalty Clause" on your loan, then the lender will issue you a payoff demand, any time you request it (for a small 20 fee or so) Now you will see that your statement shows 80k principle, and your payoff will show 83,544, which is an example of a payoff including interest that is due up to the Payoff Date. So to answer, no you will not be liable to pay off any interest, that is not due at the time of payoff. Contact your lender for a copy of your loan docs, to see if you have a prepayment penalty and to order your payoff. _________________ Chris Gummerson Bay Valley Mortgage Group bayvalleymortgage.com 714-367-5125

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