Mortgage Paydown Programs

I had a reader write in asking about a Mortgage Paydown Program that would help her pay off her mortgage of $275,000 in 10 years. The program also told her that her payment of $1423 / month wouldn’t change.

I just wanted to write a little about this since I keep hearing of people wondering if these are actually legit. Well before you go any further, do the math. Say for example her lender was really nice and stopped charging her interest. If she wanted to pay down the loan in 10 years, her monthly payment would be $2291.67. So how exactly is this Mortgage Paydown Program going to allow you to pay a $275,0000 loan that is accruing interest and keep the payment at $1423? Smells like a scam to me.

If you are really serious about paying your mortgage down earlier, just make a few extra payments a month up to what you can afford. I make 2 extra payments a year. What I do is take my mortgage payment of $1334 and multiply it by 2 to see the total amount of the extra payments. I then divide that ($2668) by 12 so that I can distribute it evenly over 12 months. So I just add an additional $222 to my mortgage payment each month. At the end of the year I would have made 2 extra payments which in turn lowers my interest and lessens the amount of time that I will need to pay my mortgage.

I would also reccomend doing something like this rather than refinancing to a 15 year. Sure the interest rate would be a little lower, but you are then on the hook for a larger payment every month. With what I am doing, I can make the extra payments if I have the money, but if I don’t I can still just pay the minimum payment. So it is more of a security blanket than anything. With the way the economy and gas prices are who knows what my financial situation will look like in a few months.

5.24% Home Equity Loan at Pentagon Federal Credit Union

Here is a great deal from Pentagon Federal Credit Union. They are currently offering home equity loans at 5.24% for up to 120 months. This is a fixed rate people, so no, it isn’t going skyrocket later. To get this rate you need to have at least 20% equity in the home after the loan is taken out. If you don’t have that much equity, their other rates are pretty good as well.

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I can’t find anywhere where it discusses closing costs, but when I took out my home equity loan with them, there were zero closing costs. Yes, not even an appraisal. I would call them to ask about closing costs prior to applying. Since PenFed is a credit union, you need to be a member to get in on these great rates. Most credit unions require you to live or work in a certain area, however with PenFed anyone can join and the process is fairly simple. If you don’t fit in their field of membership then sign up to be a member of the National Military Family Association (NMFA). The cost is $20 to sign up and you don’t need to renew the membership every year to stay a member of the Credit Union. Not a bad way to get you in the door here.

You can get statements in the mail or have everything done electronically. You can even have your loan paid through their website, so no need to write checks. Which means that you can make the payment the day before it is due.

They offer other products as well like cash back credit cards, checking and savings accounts too. I currently have a home equity loan with them and am definitely happy with everything. The next time I need another mortgage or decide to refinance, I am sticking with PenFed. You just can’t beat their low rates and nonexistent fees.

Mortgage Rates – They Are A Droppin’

Thanks to all the Fed cuts over the past few months, the Mortgage rates are approaching their all time lows again.

Pentagon Federal Credit Union, my current lender, has also lowered their mortgage rates. They are currently offering a 30-year fixed at 5.875%.

This is definitely competitive if not the lowest out there. If you are interested in something other than a 30 year, check out all rates for all their mortgage products here! The rates are great for those as well.

Pentagon Federal Credit Union is one of the few credit unions that can be joined by anyone. See this Post for details on how to become a member.

Still Paying PMI?

I just got back from meeting with my friend for lunch and somehow we got on the topic of mortgages. He bought a pretty large house (more than he could afford) about 3 years ago. He couldn’t come up with the 20% and is stuck paying Private Mortgage Insurance (PMI). PMI is a portion of your mortgage that you pay to the lender as insurance to them that you can make the payment. You usually pay PMI if you can’t put 20% down on a loan. This also insulates the lender from market fluctuations where the value of the house could be less than the outstanding loan amount, like the current housing mess that is going on now.

Anyway, he took out a 30 year fixed mortgage, so odds are he’s paid some principal down. I told him that he really needs to get rid of the PMI. It is wasted money since it doesn’t go toward your mortgage at all. One thing I recommened he do is refinance with a 80/10/10 loan. What this means is that you take out a mortgage for 80% of the value of the loan, you put 10% down and the other 10% is put into a home equity loan. The 10% down and the 10% home equity loan satisifies the 20% down on the first loan thus avoiding PMI. You can do this same thing when purchasing a home, not just with refinancing.

There are many ways to avoid PMI these days so don’t opt for it just because you don’t have the full 20%. PMI is also very difficult to get out of once you have it on a mortgage. You have to have the lender review the loan to see if the home as increased in equity to satisfy the 20% needed to avoid paying it. You can imagine how hard this must be these days as values are actually decreasing. Your only other way is to refinance, but that can cost you some closing costs.

These days, there is no sense paying more money than you need to, that the would-be PMI and save it for a rainy day instead!

Pentagon Federal Credit Union Low Home Equity Rates

Ok, I know I mentioned yesterday that taking out a Home Equity loan to pay off cars and other items could be risky. Well if you HAVE to do it, I thought I would offer a reccomendation.

I currently have a Home Equity loan through Pentagon Federal Credit Union. They are essentially a credit union that anyone can join. The reason I went with them was because there were no closing costs. LITERALLY! I asked for $20,000 and they sent me a check for $20,000. No fees, or anything. Not sure where else you can get a deal like that.

They are now offering Home Equity loans up to 120 months with no points or closing costs for 4.99%. The best part is that this is a fixed rate. So it is not going to change for the life of the loan like other lenders do. When I got my loan last year the rate was at 7.24%, so this is a pretty good deal!

Signing up is easy. If you don’t fit in their field of membership then sign up to be a member of the National Military Family Association (NMFA). The cost is $20 to sign up and you don’t need to renew the membership every year to stay a member of the Credit Union. Not a bad way to get you in the door here.

You can get statements in the mail or have everything done electronically. You can even have your loan paid through their website, so no need to write checks. Which means that you can make the payment the day before it is due.

They offer other products as well like cash back credit cards, checking and savings accounts too. Over the year I have had my loan with them I am definetly happy with everything. The next time I need another mortgage or decide to refinance, I am sticking with PenFed. You just can’t beat their low rates and nonexistent fees.