Questions tagged [principal]
31 questions
39
votes
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Why do banks want you to pay off interest before principal?
When you take out a traditional mortgage the first payment you make to a bank pays off mostly interest and then later payments start paying off principal.
What is the reason for this?
Is it just a historical accounting/industry convention? Or is…
bernie2436
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Paying Off Principal of Home vs. Investing In Mutual Fund
I close on my first home October 21. I've locked in a 4.330% APR on a 30-year fixed conventional mortgage and my payment will be ~$800/month. I've put the required 20% down to avoid paying PMI.
However, the $800/m isn't even 25% of my take-home…
Chuck Callebs
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27
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6 answers
What does "not touching the principal" actually mean?
When talking about "trust fund children" or large savings it's common to hear the phrase "not touching the principal", which means that only the "earnings" from the money are spent, and the cash pile itself does not get smaller.
However I am not…
ConcernedCitizen
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Why making additional payment to mortgage counts towards principal? Why does it matter?
When it comes to mortgage advice, some people recommend making an extra payment. The logic is :"These extra payments are automatically applied to your principal, not interest".
Why does it matter if the extra payment is applied to the principal and…
Victor123
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How do principal payments on my mortgage affect my taxes?
If I choose to pay a larger chunk into my principal say every 6 months, does the extra money I pay into it become tax deductible, or how does it affect my taxes in general. Also, I'm self employed if that accounts for anything...
I'm in the United…
Gup3rSuR4c
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6 answers
Paying over minimum monthly charge of credit cards
I have a $80 minimum on my credit bill.
If I pay them $100, do the additional $20 go to the card's Principal or Interest?
If it goes to Interest, do I have to explicitly state that those $20 go to Principal?
lamcro
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7
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Should I pay the interest or the principal on my second mortgage?
We have a second mortgage on our home from 10/08. It was designed to be deferred for five years, so we're right in the middle. After the deferral, our monthly payment will be $413.74 for 25 years. The original balance was $51,000. The interest…
djibouti33
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Reducing mortgage term by paying off a chunk of the principal each quarter - how effective is this?
A family member once told me about a method for reducing the term of a mortgage "significantly".
They didn't know (or I can't remember) the details but it had to do with certain mortgages that recalculate the interest quarterly. From what I remember…
bob esponja
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6
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How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
Here is how a normal fixed-rate monthly amortization schedule is calculated:
First we determine the total monthly payment:
Payment = [P*(r / n)(1 + r / n)^nt] / [(1 + r / n)^n*t - 1]
where n = 12, P is the loan, t is the loan term, and r is the…
Nova
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How much share should I get in our property
In 2012, my brother, my mom, my dad, and I bought $349,000 property with 10% down to it. I paid the most towards the down payment, $10,000.
Our mortgage is around $1,600/month and property tax of $2,500 yearly. I moved out in 2015. So my brother and…
Vhozip
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What 25-day investment, principal guaranteed, can be used for credit card arbitrage?
What is the most profitable 25-day investment I can make that
guarantees that I at least get the principal back? Notes:
Many brokers accept credit card deposits w/ no fees, and the
credit card company counts it as a purchase, so I have a 25-day…
user1731
4
votes
1 answer
Principal Residence & no gifting tax = loophole? (Canada)
Here is a hypothetical scenario I was discussing with someone today that I think seems fishy, but I can't find much info on.
An adult gives money to his 20 year old kid to buy a house as a gift.
The kid lives in it, renovates it, and flips it in…
guest12345
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does interest payment on loan stay the same if I pay early
Hopefully, my question doesn't sound dumb, because I'm not a finance guy.
Suppose I have a 100k loan, and the monthly payment is 1k.
My loan payment goes 600 to interest and 400 to pay down principal.
Next month, the total payment will still be 1k,…
NL3294
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What about paying extra principal on a weekly basis?
I have a branch where my mortgage is held, very close proximity to my house. I have extra cash flow on a weekly basis. If I make an extra $500 dollars a week, vs paying $2,000 at the end of the month, will this be reduce my mortgage faster?
Fred Katani
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Credit Card Amortization via Principal-Only Payments
On a home loan amortization schedule, I can make the monthly payment and add the principal-only owing for the "next" payment along with it, and avoid paying the interest for that next month, which amounts to skipping over that line on the payment…
Dorian Greer
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