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Question about mortgage red flags


We have a 30yr fixed mortgage on which we have been paying an extra $300 a month on principal, for years now. We have almost no consumer debt and live pretty frugally. Recently we ordered a new car, modest in nature, and will pay cash for it. We've decided to charge ourselves 3.5% for the loan and would like, in addition to making the scheduled payments to ourselves, take the $300 extra off the mortgage and apply it to our car loan to "retire" that faster. Then apply it again to the mortgage.
My question: After so many years of paying the extra on the mortgage, will its sudden absence be a red flag to the mortgage company? I could call them and ask but I wondered if just asking would be a red flag. Any wisdom here?
And thanks,
sa
Reply to
semi-ambivalent

What do you mean by "red flags"? What is it you think will happen, or not happen?
If you've been doing it correctly, each extra payment has been marked as going towards principal. Stopping that should not cause the mortgage holder any problems.
Brian
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Day 305 of the "no grouchy usenet posts" project
Reply to
Default User

Remember that the mortgage lender hates to see you making those extra $300 principal payments each month because doing so reduces their interest income over the life of the mortgage. My guess is that they will be happy if you stop.
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 .Bill.
Reply to
Bill

Actually, whether the mortgage lender hates it or not depends on the mortgage interest rate vs. the current rate for a new loan. If the mortgage is higher than the current rate (very likely right now), then the lender hates to see it paid off. If it's the other way, the lender would like their money back so they can lend it at the current higher rate. -- Doug
Reply to
Douglas Johnson

This seems to be some funny accounting to me. You are paying real, out of pocket interest on the mortgage at, what, 6%? So you are paying that to reduce an internal, self imposed, 3.5% debt faster? What is the bank paying you on savings, 1%?
If buying the car reduces your cash position lower than you would like, then it makes sense to stop the extra mortgage payments for a while. Otherwise, I can't see it.
While I doubt it would raise any red flags, why do you care? If you are in compliance with the terms of the mortgage, you can raise enough flags to fill Red Square and there is nothing they can do.
-- Doug
Reply to
Douglas Johnson

Very true. I assumed from the oiginal poster's statement that he has a mortgage "on which we have been paying an extra $300 a month on principal, for years now." that his rate is likely higher than current rates. If that is true, he might well save a significant amount by refinancing at current rates.
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 .Bill.
Reply to
Bill

Actually, the mortgage was probably sold off, and the loan SERVICER would hate to loose its servicing fees when the loan is paid off early.
Reply to
Wallace

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