I have a 360 months $80k mortgage loan with Bank of America. I have about 340 months payments left?

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My grandma died and I inherited $ 20k. Can I pay $ 20k towards the mortgage and have BOA re-adjust my mortgage payments to a 340 month pace? What is that process called? What do I tell the Loan Officer?

  1. Reply
    Jimbo S
    April 29, 2011 at 10:34 pm

    You can do that. But, Bank of America will royally rip you off if you do so. First, they will make sure you end up paying an inheritance tax on the money if you havent already paid it. They really dont like when you pay the mortgage down. Second, they will try to apply the 20k towards interest on not principle. You must have in writing that you want it applied towards principle. Third, Bank of America will charge fees up the butt to restructure your loan. You will end up paying about 25% or $ 5,000 in fees. The process is called refinancing. You tell the loan officer you want to pay down $ 20k on principle. He will draft the documents, fax them to you, you sign them.

  2. Reply
    April 29, 2011 at 11:31 pm

    You can find any number of mortgage calculators on line or use an excel spreadsheet to determine what impact of paying down your principal. Your mortgage papers will say if there is any prepayment penalty or not. you send in the check with the instructions to apply it to the principal.

    But if I were you, I would talk with a independent financial planner. What is best to do with the money depends on your financial situation. Do you have adequate cash savings? (3 months of income minimum). Do you have retirement savings? You might have a better investment result and tax reduction by setting up an IRA. a few hundred dollars to talk with an expert (a planner that is not trying to sell you anything) is well worth it.

    There is no inheritance tax unless you talking millions.

  3. Reply
    April 30, 2011 at 12:02 am

    YOu need to check that there are no early redemption charges and also that it us possible for the payment to be set off against the capital and not just taken as payments up front. I would get some financial advice however as you may be able to invest your capital in some other way – need to weigh up how much interest is charged on the loan etc.

  4. Reply
    April 30, 2011 at 12:26 am

    You probably can, but you probably do not want to. What I think you want is a loan modification, but what you going to get is a refinance and it is going to cost you thousands of dollars in closing costs. I would strongly suggest you talk to a financial advisor about the best use of this money to improve your financial situation.

  5. Reply
    Beverly S
    April 30, 2011 at 1:24 am

    No, paying additional principle does not change/lower your payments, it just helps you to pay it off sooner. What you can do is refinance for 60k & bring the 20k to the closing table, that way your new mortgage would only be for 60k & would lower your payments.

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