Re: Home mortgage amortization with two different interest rates?

From: Buzz L. (buzzl_at_lightyear.com)
Date: 08/06/04 

Date: Fri, 06 Aug 2004 19:26:24 GMT

Excellent points! As far as I understand, however, the 20% equity is based
solely on the initial purchase price (190,000 in my case). I will put down
19,000 and will borrow 171,000. When I've paid my principle down from
171,000 to 152,000 then the rate will go from 6.497% to 6.122%.

Is that what you were saying would be easy to calculate? I suppose that
152,000 is approximately 11.1% of the actual borrowed amount. I think
that's right. If you can tell me how to calculate that in Excel I'd really
appreciate it!

Thanks for your help!

Buzz

"Domenic" <domenic22@sympatico.ca> wrote in message
news:domenic22-279A34.14580706082004@msnews.microsoft.com...
> I'm not in the mortgage business, but here are a few thoughts...
>
> If the criteria for the drop in interest rate were based on paying off
> 20% of your mortgage instead of achieving 20% equity in your property,
> then one could make the necessary calculations and compare one against
> the other.
>
> But since the criteria is based on achieving 20% equity in your
> property, the calculations would be made difficult since property values
> fluctuate according to market conditions. Also:
>
> 1) Who will determine the property's worth?
>
> 2) Who will pay for an appraisal, if one is needed?
>
> Obviously, the longer it takes to achieve the target, the more interest
> you'll end up paying. And worse, if property values decline during the
> term of your mortgage and you never achieve the target, no savings will
> be had.
>
> In the face of such uncertainties, I wonder if that deal is really all
> that "special".
>
> In article <ddPQc.2331$KZ2.1965@fe2.texas.rr.com>,
> "Buzz L." <buzzl@lightyear.com> wrote:
>
> > Hey, folks!
> >
> > I was wondering if anyone could help me use Excel to solve this problem.
I
> > sure would appreciate it! I've been told by a mortgage broker that I've
> > qualified for the "special deal" (yeah right!) and instead of paying a
PMI
> > (mortgage insurance) that my interest rate will be 0.375% higher at the
> > beginning of the loan and will drop to the standard rate after I've
achieved
> > 20% equity in the property I'm considering. The broker then extols the
> > virtues of writing off the interest and how wonderful life will be if I
take
> > this route. I want to calculate it out because I think he's full of it.
> >
> > So, is there a way to calculate with Excel an initial rate (mine would
be
> > 6.497%) and, after I've achieved a 20% equity, drop the rate to 6.122%
and
> > see what the total interest would be?
> >
> > The whole situation gets sticky when you take into consideration tax
> > concerns and stuff but I'll worry about that later. I just want to find
out
> > upfront if paying $30 per month for mortgage insurance is cheaper than
the
> > extra interest on the loan.
> >
> > If anyone could help I sure would appreciate it!
> >
> > Thanks.
> >
> > Buzz