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Author Topic: Very basic question I am stuck with... paying back early  (Read 247 times)
christianp
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« on: March 31, 2010, 03:41:51 PM »

Hello there

I am doing a small project for school with mortgages and Excel sheets etc... quite boring and not important to my question.
I guess it's quite a stupid/newbie question, but I don't know much about this stuff and find it hard to find good info.

Assuming I buy a house for 400.000 and get a mortgage for it, since I don't have that kind of cash lying around...
Over here that would mean a mortgage payment about 1600 per month over 30 years (actually 1.569 at an APR of 2.48, but who's that exact...), which totals to 576.000.

Now let's say after 3 years I sell the house for whatever reason, for the exact same price of 400k.
I've already paid 57.600 in mortgage payment, and now I'm able to give the bank 400.000 in one go.

Can anyone tell me - very basically, no great detail or exact numbers required - what happens here?
I'm really lost... obviously I don't owe the bank 576.000 because I paid back early, but how much DO I owe them? Is 457.600 gonna cover it? How does this work?



Any help much appreciated!

Thanks a lot!
Chris
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« Reply #1 on: April 03, 2010, 10:54:18 PM »

You are basically paying for mostly interest during the first 7 years. The interest is calculated on a per diem (day) basis, so you will only need to payback the outstanding balance to the date of closing. Many times clients will get confuse that their official payoff balance is more than what what was on their previous month statement. I would have to explain that the mortgage company added the interest to the actually data of closing plus 1 or 2 days to cover for any period it takes the check/wire to get to them. You can easily get a mortgage amortization schedule on excel to figure this out.
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