ON Canada - did you talk to the bank prior to skipping a payment? You may want to consider refinancing your current mortgage if the rates would make sense. Email me if you are in Ontario and I will be more than happy to review your consideration victor_catalan@centum.ca - Victor Catalan (647) 378-2143.

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I'd like to pay in a lump sum that is about 20% of my outstanding mortgage (mostly repayment - some endowment type). the bank has suggested that i can either reduce the term of the mortgage or reduce the monthly repayment. is there a generally accepted best option?

Go for the term. This will reduce the interest that you have to pay in the long run.

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No. Mortgages do not work that way. Any lump sum payment will be applied directly to the principal amount outstanding, and that will shorten the number of payments remaining to be paid. But the monthly amount will remain unchanged.

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I want to reduce my mortgage and intend to increase payments, but not sure shall i save the money and pay of a lump sum each yesr or increase monthly payments. the bank says interest is paid daily and is standardd variable rate

Generally speaking and if I were in your position I would definitely allocate the extra cash to my mortgage. This should be more tax effective than saving the money in the bank as the interest on the savings will be taxable and the saving you will realize by contributing extra to your mortgage should be safe from the tax man. You should obviously check the interest you'll get from the bank vs the interest you pay on your mortage as well as your effective personal tax rate but I'll bet anything that paying off your mortgage will be your best bet. Something else to bear in mind is that if you pay an extra $5 a month on a 20 year mortgage of roughly $750,000 you'll reduce your mortgage by roughly a whole year! Therefore anything extra off your mortgage comes straight off the capital amount! Hope this helps!!

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Is there anyway that i can lower my monthly mortgage payments by $100.00-$200.00 per month. i already have a really good interest rate and i do not want to refinance. can i pay more towards the principle or one lump sum?

Generally doing that will shorten the length of time that you pay, It also reduces the amount of interest you pay each month, as more and more of your payments go to interest. Talk to your lender.

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Ten months ago i sold my house and reaped a significant profit. i bought a smaller home, and i realized that i could pay off the new mortgage (15 yr fixed @ 5%) with one lump-sum pmt from the profit from the old house. is this wise? my thinking is, i will pay 75k in interest over the 15 yrs, or 30-40k if i prepay and reduce the 15 yr term to 8. obviously the lump-sum pmt eliminates that debt. i've also always felt that paying interest, just to get 1/3 back at the end of the year as a write-off, was foolish. i've tried a bunch of calculators online, but i get conflicting results. paying this off will not hurt my retirement plans, but i"m wondering if the money could grow faster if i invest it, and if so, in what. my tax bracket is 35%, monthly mtgg pmt (p&i) is about 1580. and total mtgg amount is $200k. i gross $150k+ per year, and have no other debts (i own my car, and pay all credit card bills in full). any help would be appreciated, thanks in advance!

I think you should talk with a CFP and / or a CPA, regarding your situation, to analyze and decide what your best options are. Owning your home outright is a good feeling, but that's all it is, a feeling...you get no benefits from not having a mortgage (other than not having to write a check every month). Having a mortgage gives you a tax write off, as you said. But it also leaves you the cash you have on hand for other profitable ventures or investments. Have you thought of using the money on hand to purchase rental properties? Using a property management company reduces the headaches involved, if that was a worry. Investing in CD's, Mutual Funds, or bonds might be a much more profitable avenue for you. Again, you should consult with a CFP & a CPA about what your best approach is. I'm not a CFP or a CPA, but in my honest opinion, paying your mortgage off is not your best option available for you overall.

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I think they are great when you have a commission based job/career. we have a fixed interest only loan, so if things are tight we can pay bare minimum and when they are more relaxed we can more than make up for that loss of principal by paying more.......and every time you pay principal your actual (interest) payment goes down.....so over time, adding lump sums will reduce your payment versus paying a fixed mortgage for forever/or until its paid off.

I agree with you that the "demonizing" of Interest Only loans is ridiculous. There is no such thing as a "bad" loan product (in and of itself). Your approach is very sensible and your IO loan is working perfectly for you. The problem is not with IO loans; the problem is with BORROWERS who pick a loan product that doesn't work for them. The main risk for an IO loan is if the property value depreciates significantly. If there is a steep drop in property value (as there has been in California), then you may owe a lot of money for a house that is not worth that much. Even this situation is not a problem unless and until you want to sell the property. One of the things you mentioned is something that no one ever remembers... YOU CAN PAY DOWN THE PRINCIPAL ON AN INTEREST ONLY LOAN! Borrowers are so interested in getting into a home that they can hardly afford that they never even consider paying a dime extra toward the principal. You are wisely paying down the principal balance at your own pace (rather than according to an amortization schedule). Congratulations. Thanks for the question. Good luck!

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I am due to come into some inheritance soon after my mum (bless her) passed away recently, i have a mortgage for about 105k and would like to pay it off but the inheritance amount will i believe be for about 90k, can i put this amount towards the early pay off and would i be charged some kind of early settlement fee? or is it not worth paying it off, but using the inheritance to pay an addtional higher payment on my monthly repayment fee thereby reducing the amount in interest and reducing the years to pay it off? any advice would be very much appreciated. thank you.

You are in England, from your speech patterns, I suspect, and I'm in the U.S. but I believe the banking regulations are similar or the same. If you have an accountant, I suggest you discuss the best options with him/her. Since the mortgage is about 105K and the inheritance is about 90K you cannot pay it all off in full. Therefore they cannot charge you an early settlement fee. Early payoff fees are levied by some mortgage agents, but ONLY if the bill is paid in full. You can pay your current month, PLUS pay off some of the principle early. BUT I recommend you consider refinancing the mortgage, and using the inheritance to pay most of it off, and maybe shorten the number of years the new mortgage is for since you can bring the new mortgage down to as low as 15K. AND I recommend you bring the mortgage down to about 25K to 35K and use some of the inheritance to do some rehabilitation to the home. e.g. If the current mortgage is 105K for the next 20 years, bring it down to 25 or 35K for the next 10 ten years and keep the money not used to pay down the mortgage to repair, repaint, and put the home if a bit better condition. Remember, a 35K loan is much easier to procure than a 105K mortgage, and you'll have a large amount of the value of the home paid off. That's your equity. If you rehab the home, it'll be worth more. cw

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I have an endowment mortgage which runs out in 2013 and a std life policy to cover the money borrowed. i got my yearly letter about risk of shortfall etc.. and if i cash it in now it would pay off the mortgage (about £32,000). should i cash it in and get rid of my mortgage ? if not, should i make lump sum payments to reduce the 32,000 or invest any spare cash i have else where ?

Get rid of your mortgage. It's the best long-term financial thing you could ever do. Then you can invest what you'd pay monthly on interest and endowment for another 5 years and have a nice lump sum at the end, if you get what I mean.

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This is true as he showed me his paper work. he had a 8.5% tried to refi but it would take lump sum payment of 170k at closing as the home has no equity so no bank would help him. he called his bank chase manhattan and told them i am now refusing to pay for my mortgage on a toxic asset. either you will reduce the interest rate/payments or i will be going into foreclosure and you will have huge loss. i guess he spoke to the legal department well in two weeks someone called him back with an offer. they are giving him a arm mortgage that starts at 2.5% for the 3 years then it goes to 3.5% to the 6th year then after that it goes to 4.5% for the remaining 24 years his payment was 2,400 now its 1,288! anyone else got a deal of a life time like this, i am thinking of trying it.

Yes its called a loan modification. Either Tony got extremely lucky by contacting the right people or he is not telling you the whole story. Typically when you want a modification you have to demonstrate a hardship and you have to fight like heck to get a modification. Most cases a request for a modification is not a call to the bank and give them a ultimatum rather you have to fax/mail endless amounts of paper work hours and hours of follow up.