Author Topic: A question for Mustachians who are good at math  (Read 10090 times)

maryofdoom

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A question for Mustachians who are good at math
« on: September 13, 2012, 07:27:23 AM »
Hi everyone,

Long-time listener, first-time caller. I need some help from some people who are good at math, because, quite frankly, I am crap at it.

My husband and I are in the middle of aggressively paying off our house. We bought a foreclosed house in February 2009 and took out a mortgage for $62,100 at 5.5%. As of September 2012, we owe $31,100. This has been accomplished through several methods, including:
  • We make a payment every month that is greater than the required payment (payment is normally $505, we pay $650)
  • We've made an extra payment of $650 to only the principal most months (but now have a greater handle on our spending and will make this extra payment every month from now on, without fail)
  • My parents gave me a gift of all the rent I had paid them while living at home through my undergrad years ($5000) which I applied directly to the loan principal
  • Every six months, we increase the amount of our two monthly payments by $25 (so they will go up to $675 twice a month in January 2013, then $700 twice a month in July 2013, et cetera)

No amortization calculator I've found is able to take these things into account, and honestly, I don't even know where to start with writing an Excel spreadsheet to do this.

Note that my husband doesn't want to refinance the loan, despite the prevalence of low interest rates, because he thinks our property taxes will go up. We pay a pretty low rate right now, because the house was a foreclosure and was appraised way below its probable market value, especially now that we've been here for three years and have improved it somewhat.

The question then, my friends, is this: when will we own our house, free and clear?

AmbystomaOpacum

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Re: A question for Mustachians who are good at math
« Reply #1 on: September 13, 2012, 07:38:48 AM »
I can answer this for you... but a few things may help:

What was the length of the mortgage? 15 year? 30 year?

When did you make the $5000 extra payment?

maryofdoom

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Re: A question for Mustachians who are good at math
« Reply #2 on: September 13, 2012, 07:40:07 AM »
30 year mortgage, and I made the extra $5k payment in September 2009.

AmbystomaOpacum

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Re: A question for Mustachians who are good at math
« Reply #3 on: September 13, 2012, 07:41:38 AM »
Does the $505 payment include insurance and taxes?

I'm calculating your payment should be $352.60.

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #4 on: September 13, 2012, 07:42:16 AM »
I can answer this for you... but a few things may help:

What was the length of the mortgage? 15 year? 30 year?

When did you make the $5000 extra payment?

You'll also need to know when the extra $650 payments were made and when they weren't:

Quote
We've made an extra payment of $650 to only the principal most months (but now have a greater handle on our spending and will make this extra payment every month from now on, without fail)
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AmbystomaOpacum

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Re: A question for Mustachians who are good at math
« Reply #5 on: September 13, 2012, 07:43:00 AM »
You'll also need to know when the extra $650 payments were made and when they weren't:

Yeah, when I realized that, I gave up on trying to do a complete start-to-finish table and changed to doing a from-now-on table.

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #6 on: September 13, 2012, 07:45:43 AM »
I've got the start to finish table almost done (I cheated - I just stole one from my rental properties folder, and tweaked it), we can see if our answers match.  ;)

I'm also assuming the taxes and insurance are included in that 505 payment - what is just the principal and interest?
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maryofdoom

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Re: A question for Mustachians who are good at math
« Reply #7 on: September 13, 2012, 07:50:05 AM »
Yeah, I'm really looking for a from-now-on table, because all the other Internet ones I found are not at all helpful. I want to be able to go to the husband and say, "If we keep on doing what we are doing now, we will pay the house off by THIS TIME."

The $505 payment does include taxes and insurance. The statement says the escrow payment is $151.98 and the old one was $135.26, last analyzed on January 1, 2012.

House math is hard. The husband is of the opinion that "the more we pay, the faster we pay it off," which is true and perfectly fine, but I want to be able to plan.
« Last Edit: September 13, 2012, 07:56:26 AM by maryofdoom »

AmbystomaOpacum

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Re: A question for Mustachians who are good at math
« Reply #8 on: September 13, 2012, 07:55:15 AM »
what is just the principal and interest?

Actually, that doesn't matter for when it will be paid off, does it?

Here's what I get...

Month           Balance     Interest    Payment    Extra payment
September 2012  $31,100.00  $142.54     $650.00    $650.00
October 2012    $29,942.54  $137.24     $650.00    $650.00
November 2012   $28,779.78  $131.91     $650.00    $650.00
December 2012   $27,611.69  $126.55     $650.00    $650.00
January 2013    $26,438.24  $121.18     $675.00    $675.00
February 2013   $25,209.41  $115.54     $675.00    $675.00
March 2013      $23,974.96  $109.89     $675.00    $675.00
April 2013      $22,734.84  $104.20     $675.00    $675.00
May 2013        $21,489.04  $98.49      $675.00    $675.00
June 2013       $20,237.54  $92.76      $675.00    $675.00
July 2013       $18,980.29  $86.99      $700.00    $700.00
August 2013     $17,667.28  $80.98      $700.00    $700.00
September 2013  $16,348.26  $74.93      $700.00    $700.00
October 2013    $15,023.19  $68.86      $700.00    $700.00
November 2013   $13,692.04  $62.76      $700.00    $700.00
December 2013   $12,354.80  $56.63      $700.00    $700.00
January 2014    $11,011.43  $50.47      $725.00    $725.00
February 2014   $9,611.90   $44.05      $725.00    $725.00
March 2014      $8,205.95   $37.61      $725.00    $725.00
April 2014      $6,793.56   $31.14      $725.00    $725.00
May 2014        $5,374.70   $24.63      $725.00    $725.00
June 2014       $3,949.33   $18.10      $725.00    $725.00
July 2014       $2,517.43   $11.54      $750.00    $750.00
August 2014     $1,028.97   $4.72       $750.00    $750.00
September 2014  -$466.31    -$2.14      $750.00    $750.00


Obviously, you won't pay until you owe negative, so what that really means is you'll make a smaller payment in August 2014 and own the house in September when the payment goes through.

maryofdoom

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Re: A question for Mustachians who are good at math
« Reply #9 on: September 13, 2012, 07:59:24 AM »
This is EXACTLY what I was looking for! Thank you!

I knew someone here would be able to solve this problem. :)

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #10 on: September 13, 2012, 08:24:16 AM »
Actually, that doesn't matter for when it will be paid off, does it?

No.  Just to confirm that the numbers are right.

(EDIT: It actually will, as some of that $650/mo first payment is going towards taxes and insurance.  See below.)

Obviously, you won't pay until you owe negative, so what that really means is you'll make a smaller payment in August 2014 and own the house in September when the payment goes through.

It'll actually be that the second August payment will be 283.71 instead of 750, and it'll be paid off in Aug 2014 (less than two years to go, yay!).

Amby's chart looks good, I went ahead and attached an amortization schedule anyway (starting from now - the one from the beginning is pretty trivial to do as well, I had it in another tab but deleted it).

That way if something changes (say, you can't up the payments from 700 to 725, or you get a 3k bonus windfall that you apply towards it) you can use this to see how it affects your payoff time.

(EDIT: Updated version attached a few posts below this one.)
« Last Edit: September 13, 2012, 08:55:52 AM by arebelspy »
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RoseRelish

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Re: A question for Mustachians who are good at math
« Reply #11 on: September 13, 2012, 08:29:15 AM »
   Beg Bal   Princ   Int   Ins/Taxes   Overpay   Base Payment w/overpayment   Extra 2   End Bal
Oct-12    31,100.00     210.06     142.54     152.40     145.00     650.00     650.00     30,094.94
Nov-12    30,094.94     214.66     137.94     152.40     145.00     650.00     650.00     29,085.28
Dec-12    29,085.28     219.29     133.31     152.40     145.00     650.00     650.00     28,070.99
Jan-13    28,070.99     223.94     128.66     152.40     170.00     675.00     675.00     27,002.06
Feb-13    27,002.06     228.84     123.76     152.40     170.00     675.00     675.00     25,928.22
Mar-13    25,928.22     233.76     118.84     152.40     170.00     675.00     675.00     24,849.46
Apr-13    24,849.46     238.70     113.89     152.40     170.00     675.00     675.00     23,765.75
May-13    23,765.75     243.67     108.93     152.40     170.00     675.00     675.00     22,677.08
Jun-13    22,677.08     248.66     103.94     152.40     170.00     675.00     675.00     21,583.42
Jul-13    21,583.42     253.67     98.92     152.40     195.00     700.00     700.00     20,434.75
Aug-13    20,434.75     258.94     93.66     152.40     195.00     700.00     700.00     19,280.81
Sep-13    19,280.81     264.23     88.37     152.40     195.00     700.00     700.00     18,121.59
Oct-13    18,121.59     269.54     83.06     152.40     195.00     700.00     700.00     16,957.05
Nov-13    16,957.05     274.88     77.72     152.40     195.00     700.00     700.00     15,787.17
Dec-13    15,787.17     280.24     72.36     152.40     195.00     700.00     700.00     14,611.93
Jan-14    14,611.93     285.63     66.97     152.40     220.00     725.00     725.00     13,381.31
Feb-14    13,381.31     291.27     61.33     152.40     220.00     725.00     725.00     12,145.04
Mar-14    12,145.04     296.93     55.66     152.40     220.00     725.00     725.00     10,903.11
Apr-14    10,903.11     302.62     49.97     152.40     220.00     725.00     725.00     9,655.48
May-14    9,655.48     308.34     44.25     152.40     220.00     725.00     725.00     8,402.14
Jun-14    8,402.14     314.09     38.51     152.40     220.00     725.00     725.00     7,143.05
Jul-14    7,143.05     319.86     32.74     152.40     245.00     750.00     750.00     5,828.19
Aug-14    5,828.19     325.88     26.71     152.40     245.00     750.00     750.00     4,507.31
Sep-14    4,507.31     331.94     20.66     152.40     245.00     750.00     750.00     3,180.37
Oct-14    3,180.37     338.02     14.58     152.40     245.00     750.00     750.00     1,847.35
Nov-14    1,847.35     344.13     8.47     152.40     245.00     750.00     750.00     508.22
Dec-14    508.22     350.27     2.33     152.40     245.00     750.00     750.00     (837.05)

I'm getting a bit different of an answer - December 2014 payoff. We're all near the same date.

AmbystomaOpacum

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Re: A question for Mustachians who are good at math
« Reply #12 on: September 13, 2012, 08:37:30 AM »
Yeah... it looks like I'm not taking into consideration the money going to insurance and taxes.

We really need to know *exactly* what your insurance and tax payments are per month. Assuming $152.40 (based on deducting the calculated $352.60 payment from the $505 you quoted), this is the table:

Month           Balance     Interest    Insurance/taxes Payment  Extra payment
September 2012  $31,100.00  $142.54     $152.40         $650.00  $650.00
October 2012    $30,094.94  $137.94     $152.40         $650.00  $650.00
November 2012   $29,085.28  $133.31     $152.40         $650.00  $650.00
December 2012   $28,070.98  $128.66     $152.40         $650.00  $650.00
January 2013    $27,052.04  $123.99     $152.40         $675.00  $675.00
February 2013   $25,978.43  $119.07     $152.40         $675.00  $675.00
March 2013      $24,899.90  $114.12     $152.40         $675.00  $675.00
April 2013      $23,816.42  $109.16     $152.40         $675.00  $675.00
May 2013        $22,727.98  $104.17     $152.40         $675.00  $675.00
June 2013       $21,634.55  $99.16      $152.40         $675.00  $675.00
July 2013       $20,536.11  $94.12      $152.40         $700.00  $700.00
August 2013     $19,382.63  $88.84      $152.40         $700.00  $700.00
September 2013  $18,223.87  $83.53      $152.40         $700.00  $700.00
October 2013    $17,059.80  $78.19      $152.40         $700.00  $700.00
November 2013   $15,890.39  $72.83      $152.40         $700.00  $700.00
December 2013   $14,715.62  $67.45      $152.40         $700.00  $700.00
January 2014    $13,535.47  $62.04      $152.40         $725.00  $725.00
February 2014   $12,299.90  $56.37      $152.40         $725.00  $725.00
March 2014      $11,058.68  $50.69      $152.40         $725.00  $725.00
April 2014      $9,811.76   $44.97      $152.40         $725.00  $725.00
May 2014        $8,559.13   $39.23      $152.40         $725.00  $725.00
June 2014       $7,300.76   $33.46      $152.40         $725.00  $725.00
July 2014       $6,036.63   $27.67      $152.40         $750.00  $750.00
August 2014     $4,716.69   $21.62      $152.40         $750.00  $750.00
September 2014  $3,390.71   $15.54      $152.40         $750.00  $750.00
October 2014    $2,058.65   $9.44       $152.40         $750.00  $750.00
November 2014   $720.49     $3.30       $152.40         $750.00  $750.00
December 2014   -$623.81    -$2.86      $152.40         $750.00  $750.00


I concur on December 2014.

Widerhaken's chart differs slightly, probably because of different assumptions of when the $25 increase takes effect.
« Last Edit: September 13, 2012, 08:42:24 AM by AmbystomaOpacum »

RoseRelish

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Re: A question for Mustachians who are good at math
« Reply #13 on: September 13, 2012, 08:41:51 AM »
Good work. December 2014 it is!

maryofdoom

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Re: A question for Mustachians who are good at math
« Reply #14 on: September 13, 2012, 08:52:35 AM »
Well, if it's August 2014 or December 2014, that's not a huge deal to me. They are both pretty darn good.

What's probably going to happen is that I'll save up my pittance from freelance editing jobs, and the husband will kick in the bonus he gets from the bagpipe band, or money from gigs he gets from playing drums with his swing band, and we'll try and get a big chunk of money ready to go around June or July 2014, then pay the last little bit off all at once. (I like how around these parts, $5,000 is "a little bit.")

Either way, it seems as though we will achieve my goal of paying off the house before the husband is 35 (he was born in September 1980) and that is pretty excellent.

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #15 on: September 13, 2012, 08:53:25 AM »
Oh.  Duh.  Because the taxes and insurance are included in the first 650/mo payment.

So I took the initial 650/mo payment, took off $152.40 for taxes and insurance (giving a initial payment of 497.60), increased that by 25 each month, and made the extra payment still.  Updated and attached amortization schedule.

I see a final payoff in Nov 2014 with the second payment being 126.21 that month.

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Re: A question for Mustachians who are good at math
« Reply #16 on: September 13, 2012, 09:12:34 AM »
Note that my husband doesn't want to refinance the loan, despite the prevalence of low interest rates, because he thinks our property taxes will go up. We pay a pretty low rate right now, because the house was a foreclosure and was appraised way below its probable market value, especially now that we've been here for three years and have improved it somewhat.

Maybe it is different where you live, but where I live refinancing won't affect your taxes. The only people who see the appraisal are you and your lender, the local government doesn't get a copy. They do their own appraisal. They would only re-assess the property if you did permitted improvements to the place (adding on, etc.)

It doesn't sound like you should refi anyway, though, since your payoff date is so soon.

maryofdoom

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Re: A question for Mustachians who are good at math
« Reply #17 on: September 13, 2012, 09:17:36 AM »
The husband is filled with paranoia. That's a whole 'nother set of problems to deal with...he is paranoid about EVERYTHING. I find myself in situations sometimes where I spend more money than I normally would in order to assuage his fears about things going wrong, or to save him frustration.

I mean, he's not at the point where he's sitting on the porch with a shotgun yelling, "GET OFF MY LAND!" but it may come to that eventually.

Not refinancing at this point in the life of the loan is easier on him, since he doesn't have to deal with signing more papers and sseing more lawyers.

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #18 on: September 13, 2012, 09:20:39 AM »
Here's an option: Get a PenFed HELOC at 1.99%. 

https://www.penfed.org/home-equity-loan/

Get a HELOC for 31,200.  Pay off your whole mortgage now with that, then spend the next two to five years paying off that HELOC.

Drops your rate from 5.5% to 2%.

And your property taxes won't be affected at all (of course they wouldn't either way I'm fairly sure, but a HELOC definitely has nothing to do with that).
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maryofdoom

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Re: A question for Mustachians who are good at math
« Reply #19 on: September 13, 2012, 09:30:53 AM »
Now that IS an option. Although I don't think I qualify for PenFed, even though I kind of work for the government, because I also kind of work for a university. Unless that's something that everyone can get.

Husband is also a member of his local credit union. I can access a credit union through work, as well.

You've given me a lot to think about.

SweetTPi

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Re: A question for Mustachians who are good at math
« Reply #20 on: September 13, 2012, 09:44:03 AM »
This is the Excel sheet I use to play around with extra payment senarios on my mortgage. 

http://office.microsoft.com/en-us/templates/loan-calculator-with-extra-payments-TC006206283.aspx

AJ

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Re: A question for Mustachians who are good at math
« Reply #21 on: September 13, 2012, 11:04:48 AM »
And your property taxes won't be affected at all (of course they wouldn't either way I'm fairly sure, but a HELOC definitely has nothing to do with that).

Just curious, why would a HELOC be any different than a regular mortgage in regards to taxes? You'll still need an appraisal, and a new lien will still be filed on the peoperty...

Portland Man

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Re: A question for Mustachians who are good at math
« Reply #22 on: September 13, 2012, 12:14:24 PM »
With a 2 year payoff schedule, it almost definately does not make sense to refinance unless you can do a free streamline refinance or something of that nature.

Even if you drop a full 3.5% your savings over such a short period will likely be less than the refinance costs.

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Re: A question for Mustachians who are good at math
« Reply #23 on: September 13, 2012, 12:23:43 PM »
Even if you drop a full 3.5% your savings over such a short period will likely be less than the refinance costs.

PenFed's HELOC doesn't have closing costs as long as you keep it open at least 2 years.

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Re: A question for Mustachians who are good at math
« Reply #24 on: September 13, 2012, 01:03:53 PM »
There is also a cost to me - the cost of the husband getting paranoid and worrying about the appraisal and the possibility of our taxes being affected. If the savings is a couple thousand dollars, then yes, that's probably worth it, but if the savings is something like $600, then it's not.

I mean, to me, it is, but he's a neurotic who worries. If I have to pay more to give him peace of mind, I am sometimes willing to do that.

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Re: A question for Mustachians who are good at math
« Reply #25 on: September 13, 2012, 01:51:36 PM »
Then I'd say to stick with your current plan, skip the headache/fear and pay off the mortgage in a few years based on your current plan - don't refi or get a HELOC.

And @arebelspy: I think you are getting a quicker payoff because you amortize the remaining balance over 360 periods rather than over the remaining time - resulting in a lower interest expense and more principal paydown.

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #26 on: September 13, 2012, 01:57:30 PM »
@arebelspy: I think you are getting a quicker payoff because you amortize the remaining balance over 360 periods rather than over the remaining time - resulting in a lower interest expense and more principal paydown.

No.  That makes no difference, if it's 15, 30, or 100 year amortization.  My sheet matches your table exactly.

My results show the same, but I see the balances as being at the beginning of the month.  You seem to see it as at the end.  I.e. beginning of Sept, balance is 31,200.  Then you make the two payments.

So in Nov. 2014 the balance is 720.51.  You then make your two payments, one is 597.60 (plus the insurance and taxes), the second is $126.21.  Then it is paid off.  In Nov. 2014.  You seem to interpret it as the balance at the end of this sept is 31,200, thus the balance at the end of Nov 2014 is $720.51, meaning you send in Dec payments and it's paid off in December.

I'd still think that Nov 2014 is the correct answer, but I'm open to being wrong.

Either way, it has nothing to do with amortizing of the interest.
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RoseRelish

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Re: A question for Mustachians who are good at math
« Reply #27 on: September 13, 2012, 02:18:29 PM »

No.  That makes no difference, if it's 15, 30, or 100 year amortization.  My sheet matches your table exactly.

My results show the same, but I see the balances as being at the beginning of the month.  You seem to see it as at the end.  I.e. beginning of Sept, balance is 31,200.  Then you make the two payments.

So in Nov. 2014 the balance is 720.51.  You then make your two payments, one is 597.60 (plus the insurance and taxes), the second is $126.21.  Then it is paid off.  In Nov. 2014.  You seem to interpret it as the balance at the end of this sept is 31,200, thus the balance at the end of Nov 2014 is $720.51, meaning you send in Dec payments and it's paid off in December.

I'd still think that Nov 2014 is the correct answer, but I'm open to being wrong.

Either way, it has nothing to do with amortizing of the interest.

I'll agree with the beginning/end of month answer. Very obvious.

And I disagree that the length of amortization doesn't matter. See the table below - notice that the longer the life of the loan, the less of the payment goes to principal early on. It matters because we were given the payment amount and deduced the overpayment (extra payment to principal). If you had used a longer amortization/reamortized the loan - you'd get less bang for your overpayment buck - making me wrong in my reason for the different answers!

In summary, while I agree with your answer/work on this math problem, I disagree that amortization length doesn't matter.


      Rate   5.0%               Rate   5.0%      
      Periods   30               Periods   15      
   Beg   Prin   Int   Extra   End      Beg   Prin   Int   Extra   End
1    100,000.00     1,505.14     5,000.00        98,494.86    1    100,000.00     4,634.23     5,000.00     -       95,365.77
2    98,494.86     1,580.40     4,924.74     -       96,914.46    2    95,365.77     4,865.94     4,768.29     -       90,499.83
3    96,914.46     1,659.42     4,845.72     -       95,255.04    3    90,499.83     5,109.24     4,524.99     -       85,390.59
4    95,255.04     1,742.39     4,762.75     -       93,512.64    4    85,390.59     5,364.70     4,269.53     -       80,025.89
5    93,512.64     1,829.51     4,675.63     -       91,683.13    5    80,025.89     5,632.93     4,001.29     -       74,392.96
6    91,683.13     1,920.99     4,584.16     -       89,762.15    6    74,392.96     5,914.58     3,719.65     -       68,478.38
7    89,762.15     2,017.04     4,488.11     -       87,745.11    7    68,478.38     6,210.31     3,423.92     -       62,268.07
8    87,745.11     2,117.89     4,387.26     -       85,627.22    8    62,268.07     6,520.83     3,113.40     -       55,747.25
9    85,627.22     2,223.78     4,281.36     -       83,403.44    9    55,747.25     6,846.87     2,787.36     -       48,900.38
10    83,403.44     2,334.97     4,170.17     -       81,068.47    10    48,900.38     7,189.21     2,445.02     -       41,711.17
11    81,068.47     2,451.72     4,053.42     -       78,616.75    11    41,711.17     7,548.67     2,085.56     -       34,162.50
12    78,616.75     2,574.31     3,930.84     -       76,042.44    12    34,162.50     7,926.10     1,708.12     -       26,236.39
13    76,042.44     2,703.02     3,802.12     -       73,339.42    13    26,236.39     8,322.41     1,311.82     -       17,913.99
14    73,339.42     2,838.17     3,666.97     -       70,501.25    14    17,913.99     8,738.53     895.70     -       9,175.46
15    70,501.25     2,980.08     3,525.06     -       67,521.17    15    9,175.46     9,175.46     458.77     -       0.00
16    67,521.17     3,129.09     3,376.06     -       64,392.08    16    -       -       -       -       -   
17    64,392.08     3,285.54     3,219.60     -       61,106.54    17    -       -       -       -       -   
18    61,106.54     3,449.82     3,055.33     -       57,656.72    18    -       -       -       -       -   
19    57,656.72     3,622.31     2,882.84     -       54,034.42    19    -       -       -       -       -   
20    54,034.42     3,803.42     2,701.72     -       50,230.99    20    -       -       -       -       -   
21    50,230.99     3,993.59     2,511.55     -       46,237.40    21    -       -       -       -       -   
22    46,237.40     4,193.27     2,311.87     -       42,044.13    22    -       -       -       -       -   
23    42,044.13     4,402.94     2,102.21     -       37,641.19    23    -       -       -       -       -   
24    37,641.19     4,623.08     1,882.06     -       33,018.11    24    -       -       -       -       -   
25    33,018.11     4,854.24     1,650.91     -       28,163.87    25    -       -       -       -       -   
26    28,163.87     5,096.95     1,408.19     -       23,066.92    26    -       -       -       -       -   
27    23,066.92     5,351.80     1,153.35     -       17,715.12    27    -       -       -       -       -   
28    17,715.12     5,619.39     885.76     -       12,095.73    28    -       -       -       -       -   
29    12,095.73     5,900.36     604.79     -       6,195.37    29    -       -       -       -       -   
30    6,195.37     6,195.37     309.77     -       0.00    30    -       -       -       -       -   

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #28 on: September 13, 2012, 02:42:24 PM »
Okay, so Nov 2014, we're in agreement on that one. 

Now let me convince you of the other part.  :)

It will normally make a difference how long it's amortized over, because normally that would affect your payment amount.

Since we know there will be a payment of 650 (and then a second 650 extra), it doesn't matter how long it's amortized over.

Say I have a 100k loan at 5.5%, amortized over 15 years.  Payment is $817.08.
Say I have a 100k loan amortized over 30 years.  Payment is $567.79.

If I constantly make a flat payment of 1,000/mo, my loan will pay off at the exact same time.  Both of those loans.

The amortization only sets a payment amount.  If you ignore that payment amount and send some other amount, the amortization doesn't matter.  Basically the 100k loan earns interest at my rate (5.5% in this case).  I pay it down 1k. Then the remaining amount earns interest.  I pay down 1k.. etc.  It doesn't matter how long the original schedule said, I will pay it off in a fixed amount of time. The interest rate for the 30 and 15 are the same.. I'm creating a new amortization schedule of my own with 1k payments.  And the original 30 or 15 doesn't matter.

You could think of it as a 30 year with payment of $567.79 paying 432.21 extra each month (to total the 1k payment) or a 15 year with the payment of $817.08 and extra payment of 182.92 (to total the 1k payment).. they work out to be the same.

By making my payment 1k, I'm basically doing an amortized loan of 11 years (and change).  The fact that I could have paid it in 15 or 30 with a different schedule is irrelevant.

Yes?
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RoseRelish

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Re: A question for Mustachians who are good at math
« Reply #29 on: September 13, 2012, 02:50:06 PM »
Damn.

*hangs head in shame*

Agreed. Fixed Total Payment vs. Fixed "Extra" Payment threw me off...

Thanks, arebelspy.

arebelspy

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Re: A question for Mustachians who are good at math
« Reply #30 on: September 13, 2012, 03:12:33 PM »
Thanks, arebelspy.

No problem.  :)

You were the one that caught the taxes and insurance gaffe.   Problems like this are fun.

Any topic with the title "A question for Mustachians who are good at math" you know is going to be a fun discussion.  :D
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ShavinItForLater

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Re: A question for Mustachians who are good at math
« Reply #31 on: September 13, 2012, 03:14:04 PM »
Now that IS an option. Although I don't think I qualify for PenFed, even though I kind of work for the government, because I also kind of work for a university. Unless that's something that everyone can get.

Husband is also a member of his local credit union. I can access a credit union through work, as well.

You've given me a lot to think about.

Anyone can qualify for PenFed, you just need to join the National Military Family Association or the Voices for America's Troops organization, which are open to anyone with a one time $15-20 membership fee.

Also regarding appraisals affecting taxes, at least where I live, the property tax appraisal process has absolutely zero to do with you getting your own private appraisal.  As far as I know the tax appraisers would not even have access to the appraisal--it would only go to you and the lender.  In my area at least, even the "market value" the property tax bill states has no direct relationship to the *actual* market value of the property--they have their own bizarre way of calculating that.  Property taxes can go up or down when the property is actually sold, since the purchase price is public record, but that's not relevant here.

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Re: A question for Mustachians who are good at math
« Reply #32 on: September 14, 2012, 08:08:37 AM »
Any topic with the title "A question for Mustachians who are good at math" you know is going to be a fun discussion.  :D

Yes. More of these please!

gecko10x

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Re: A question for Mustachians who are good at math
« Reply #33 on: September 14, 2012, 11:39:09 AM »
Any topic with the title "A question for Mustachians who are good at math" you know is going to be a fun discussion.  :D

Yes. More of these please!

Here you go ;-)
http://www.mrmoneymustache.com/forum/ask-a-mustachian/another-math-question/