Make Double Payments without Making Double Payments

One of the great benefits of owning a home is that you can pay it off, and I’m not talking in some “wishful thinking” sort of way. The fact is that, unless you have an interest only payment, every payment you’re making brings you closer and closer to this reality. 

The reason it can feel so very far away is because of a little word called amortization. Amortization is the method by which payments are applied to a balance. So even though your payment is the same every month, the amount of money being applied to your interest (the bank’s profit) and the principle (the balance you owe) is very different. 

Many people don’t realize that most of the money you pay on a loan toward interest is actually collected in the beginning years of your loan and it is not until you approach the end of the term of your loan that this reverses. 

Let me give you an example. Below is an actually view of an amortization schedule. This shows the first year of how a payment is applied ($200,000 loan at a 5% interest rate amortized over 30 years) 

  

One of the things you should notice is the fact that $833.33 of the $1073.64 payment goes to the bank as interest. That is 77% of your payment and while the interest you pay slowly decreases with each payment it won’t be reach 50% until year 16! 

So, how does one make double payments without having to make double payments? Well, interest is only paid once each month and once it is covered, anything over is applied directly to your balance. So… 

If you add the amount you paid to principle that month on top of your payment, you have in essence made 2 payments. Here’s an example: 

Your Payment is $1073.64 and as it is early in the loan, $833 is applied to interest and about $240 is being applied to your balance. If you pay $1313.64 this month you’ve made a double payment. Now, this amount will increase over time, but with this simple adjustment you will shave years off your mortgage and save thousands of dollars in interest as well! 

The Foreclosure Process

With all that has gone on in real estate over the last few years, it’s easy to forget that there was a market that didn’t include words like “Short Sale” and “Foreclosure”. They’ve become so common (and we’ve had so much contact with them) I think it’s just as easy to forget that not everyone understands the process of foreclosure and what some of your rights are during this process.

So I thought it might be helpful to explain a basic “outline” of what you can expect if you are one of the many homeowners facing a foreclosure.

The Notice- If you’ve begun falling behind on your payments, the first thing you can expect is a notice from the bank informing you that they are going to begin moving forward with foreclosure. You typically get this notice sent after missing your second or third payment, but I’ve heard of cases where it’s happened sooner and even much later than this. Basically, some banks are quick to act and some don’t seem to notice for years (I’ve heard stories)

The Advertisement- The most common type of foreclosure is ‘Foreclosure by Advertisement’. This process allows a bank to foreclose on a property without having to go to court. In this, the bank is required to advertise the upcoming Sheriff Sale date for a period of at least 6 weeks. During this time, you can stop the foreclosure process by getting caught up on all late payments and penalties.

The Sheriff Sale- The sheriff sale should probably be called the sheriff’s auction. This is usually held at the courthouse and it is here that people come to bid to purchase the home (though very often the only bidder is a representative from the mortgage company).

* The sheriff sale can be delayed, but this will greatly affect the redemption period. Watch this blog for more information on that in the future [or you can contact one of our agents].

The Redemption Period- This part of the process is, in my experience, the least known. During the redemption period, you still own your home and you typically have 6 months to now redeem it. There are some catches though…

First, to redeem the property, you have to pay back the entire amount of the loan plus interest. This means that you have 6 months to sell your home or secure new financing (though getting a new loan will now be… unlikely)

* Depending on circumstances, the amount you need to redeem can be greatly reduced if the highest bid received is less than what you owe. Watch this blog for more information on this in the future [or you can contact one of our agents].

Second, the redemption period can change. If a property is deemed to be “abandoned” the bank can accelerate the redemption period to just 5 weeks. There are also some situations in which the redemption period can be as much as a year. (Some of these situations include properties over 40 acres, agricultural properties and loans with over 1/3 paid off)

The Foreclosure- Once the redemption period passes the bank now owns the property and can legally begin eviction proceedings.

The reality is that the foreclosure process is not only difficult, but also confusing. If you are caught like so many and are now facing a foreclosure, I would strongly encourage you to seek out competent legal advice from a good attorney.

For those in the Monticello area, I’d also welcome you to contact our office and ask to speak to one of our foreclosure specialists.

Hello from Monticello Minnesota!

In starting the official blog for the Monticello Office of Edina Realty I wasn’t sure where I should begin. Should I add a post on the market and statistics? Maybe kick things off with some advice on staging or financing tips. Then it hit me. We should probably begin with an introduction. So here we go:

We are the Monticello Office for Edina Realty. Our agents focus on helping peolpe buy and sell homes in the Northwest Suburbs of the Twin Cities (and a little beyond the suburbs too). We list and sell homes primarily in Wright and Sherburne County, but we also do a good deal of business into Anoka County, Hennepin County and also up towards Benton and Stearns Counties.

Monticello itslef is located about 30 minutes from Minneapolis (depending on traffic of course) and we’re located right off of HWY 94 which makes for a quick commute wheteher you’re headed down to the cities or up to St Cloud.

Some of our surrounding communities include Big Lake, Becker, Albertville, Otsego, St Michael, Buffalo, Clear Lake and Clearwater (and yes, many more) and I promise we will be sharing much more information on all of these great communities and what they have to offer.

Our office features some of the very best Realtor’s in the twin cities market. We have agents that specialize in everything from Short Sales & Foreclosure to Lots & New Construction. We also have a good number of agents that specialize in Lakeshore & Waterfront, Acreage and Horse Farms.

You can visit us at www.Monticello.EdinaRealty.com if you’d like to meet any of our agents.