DIY Mortgage Acceleration

Do-it-yourselfers who are weary of yet another trip to the home improvement store may like this DIY project. It has the possibilities of increasing home equity just as quickly as a bath remodel or new deck.

You may have already built your own amortization schedule using a guide I posted earlier. And, you may have been figuring out how to accelerate your mortgage payoff by entering amounts in the monthly payment column that are higher than the standard payment. Just to make DIY mortgage acceleration really easy, I’ve created three schedules in one file:

* Original Amortization Schedule
* $100-a-month Accelerated Amortization Schedule (for disciplined DIYers who have committed to paying an extra $100 per month beginning with the very first payment)
* Real-life Accelerated Amortization Schedule (with semi-random extra-payment amounts based on financial life events such as 1) having extra $600 per month for 2 years between car loans from year 5 to year 7; 2) using $300 of a yearly tax refund 3) applying year-end bonuses, ranging from $100 to $2,100).

The mortgage-loan givens or assumptions for all three scenarios are:

* $200,000 mortgage loan
* 30-year fixed rate loan
* 6% interest rate

Here are the results of paying according to the Original, $100-a-month Accelerated, and Real-Life Accelerated Amortization Schedules:

Original (Use “edit,” “go to,” “ORIGINAL”)

* Number of Years for Payoff: 30 years
* Total Interest Paid: $231,676.38
* Total Payments Made: $431,676.38

$100-a-month Accelerated (Use “edit,” “go to,” “ACC”)

* Number of Years for Payoff: 24 years, 7 months
* Total Interest Paid: $182,537.97
* Total Payments Made: $383,234.81 (payments will be slightly less as last payment will not be a full payment)

Real-Life Accelerated (Use “edit,” “go to,” “Random”)

* Number of Years for Payoff: 21 years
* Total Interest Paid: $152,555.51
* Total Payments Made: $353,173.46 (payments will be slightly less but I didn’t want to change the flow of the amortization schedule)

You can download the file and enter information from your own life: your mortgage amount, your term, and your interest rate. Then, have fun figuring out how fast you can accelerate your mortgage payoff. If you decide to accelerate, make sure that your mortgage servicing company knows that the extra amounts you are paying each month are to reduce the principal. Source

Confessions of a Mortgage Broker

Written By: Helen Kaiao Chang

Here’s what you need to know about how mortgage brokers really work: “When I have a client I really don’t like — he’s a pain in the ass — that’s when I charge as much as I can get out of them,” says Jack, a mortgage broker based in Southern California.

Jack, whose name has been changed for this story, offers some insight in to what a mortgage broker really thinks about his customers. Jack has been in the business since 2003 and he has done many millions of dollars in mortgage loans. His confessions show you the dark side of a business now in the lime light. But don’t despair, we show you how to fight back!

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Brokers pad genuine fees and invent new ones to make more money.

Mortgage brokers do shaddy math.“Brokers move fees around to make it look legitimate,” says Jack. “Credit reports cost up to $15 per borrower. But I have witnessed loan officers charging up to $100 per credit report.”"I’ve also seen admin fees – which are bogus fees — charged up to $400,” says Jack. “I have lowered my loan origination fee and shifted the charge to either my escrow fees or title fees or my processing fee.”

Fight back! Get a good faith estimate, which shows the preliminary cost of the home loan, including the origination fee, interest rate, and processing, escrow and title fees. It also tells you your monthly payment amount, including principal, taxes and insurance.Also, don’t pay more than $15 per borrower for credit reports and don’t pay any “admin” fees! Finally, find out the amount of the standard processing fee – a genuine expense paid to a third-party who handles the paperwork of the loan. This is standard and non-negotiable, ranging from $495 to $695 in all 50 states. You can also shop around for a less expensive title and escrow company.
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Brokers have another name for “Origination Fees” — Profits.

Money Hook: Bait and SwitchAn origination fee is charged by the broker to orchestrate your loan. This fee goes directly to the broker (in addition to any rebate he earns from the lender). A “point,” 1% of the loan value, is a common fee, but this rate is negotiable and Jack admits that, “sometimes (agency managers) pressure loan officers to overcharge clients to make their numbers.”

Fight back! Make sure to negotiate the origination fee. The larger your loan, the smaller the percentage should be.
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Mortgage Brokers make clients pay higher rates to increase profits.

Mortgage Interest RatesIn addition to the other fees mortgage brokers earn, they get a rebate from the lender for sending them business. In other industries it’s known as a kick back, but in the mortgage industry, it’s perfectly legal!Jack bragged that he’s “charged borrowers, who really don’t know what the mortgage business is all about, two points.” He’s even witnessed another broker take advantage of an older lady who had a lot of equity in her property, by giving her a “one-percent option ARM (adjustable rate mortgage) loan. With that loan, the loan officer was eventually getting 3 to 4 (percent of the loan amount) back in rebate from the lender.”He summarizes it nicely: “The reason is to basically make as much money as you possibly can, while you can, and get away with it!”

Fight back! Ask your broker what his or her rebate will be. You can verify it on your settlement statement, under “yield spread” or “rebate,” prior to closing.
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Mortgage brokers change the numbers at closing – “Oops!”

Mortgage brokers change the numbers at signing.Sure there are lots of numbers that go into a closing document, and people make mistakes - but not all errors are accidental.”I have also seen loan officers during signings telling the borrowers that they will change or lower the loan origination fee after the closing,” says Jack, but they “never did so,” he adds.Jack tells of one mortgage broker who basically lied to the home buyer. “The loan officer employed a notary broker who happened to be their friend. He convinced the notary to tell the borrower at the closing that the terms of what they are getting were exactly what they were signing. The borrowers just didn’t know much. They were buying their first home and they were promised that this was the loan they were getting, but they were not.”

Fight back! Get a settlement statement before closing. The HUD-1 form gives borrowers a breakdown of all the expenses prior to close. The escrow company can give you this independent statement at least one week prior to closing, and it should match the good faith estimate within $200. Demand explanations or corrections of any significant differences.
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Brokers overcharge because you shop the loan or annoy them.

Mortgage Fraud.In Jack’s view, a client trying to get the best deal is really just an annoyance. “The client will shop you around, tell you to price the loan at a certain rate, you do it, and then at the last minute, they try to change the terms of the loan or they’re going somewhere else.”
Jack thinks that is a punishable offence. He declares, “By taking advantage of my time and being greedy, that’s when I say, ‘All right, I’m just gonna charge you extra for doing all this extra work.’”

Fight back! Remember that you are the customer and you can always walk away. It may be a hassle to delay your closing, but three weeks of dealing with your loan is a small price to pay compared to losing your house because you got a lousy loan!

Smart consumers get more than one quote and compare them, but rates change daily so get all your quotes at the same time to have a fair comparison. When you find a loan you like, lock it and make sure you get written confirmation from the lender of the rate.

Written By: Helen Kaiao Chang