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Save Moolah!
Even a small amount ($25, $50, $100) added to your mortgage payment each month when applied to the principal can have a significant impact on the total amount of interest you pay as well as how long you pay it.
For example, if you divide your monthly mortgage payment by 12 and add that amount to your monthly payment each month by the end of the year you will have paid the equivalent of an extra mortgage payment for the year—a 13th payment—all invested in principal reduction!
That 13th payment can make a big difference. For example, let’s say you borrowed $200,000 at 6.5 percent interest with a 30 year term. Your monthly payment would be a shade over $1,264 a month for principal and interest. By adding an extra $100 per month ($1,200 per year) you would pay off your mortgage in just over 23 years, knocking almost seven years off the loan and saving over $73,000 in interest.
Contact your lender to find out how they apply extra payment money from you. Some lenders may apply your extra money that you pay above your monthly payment amount automatically to your principal.
However some may appy it to your escrow account to pay taxes or insurance which is NOT what you want them to do! Make sure you read the fine print, and call (or write) your lender to confirm what they will do, or how you can assure that the extra money goes to reducing your principal balance.
Tip: Sending a separate check and clearly marking the “memo” field with your loan account and the phrase, “Apply to Principal”will help assure proper credit and provide strong documentation of your extra payments. Again, check with your lender.
Tip: Don’t bother with offers from your lender or 3rd party companies that offer to charge you money (often as much as $200-$300) to set up a bi-weekly payment program—you can accomplish the same thing yourself without their help—for free.
IMPORTANT NOTE: Although this is a great strategy to accomplish the twin goals of saving money and increasing equity in the capital asset that is your home, this may not be the best use of your financial resources.
Interest rates for home mortgages tend to be lower than most other consumer loans and your financial profile may suggest a better use for this money—like paying off higher interest consumer loans first.
Anytime you pre-pay extra money on any installment loan it has the same effect as investing your money at that interest rate. So if you had an extra $100 should you pre-pay it on a home loan at 6.5% or a consumer loan at 10%, for example? And don’t forget that mortgage interest is usually fully tax deductable, whereas other consumer interest is not.
Therefore, we recommend consulting a qualified financial advisor for a proper evaluation of your total financial picture before proceeding with this strategy.
(This money saving blog story was reproduced from the “Buyershome Journal” blog – April 12, 2007)
Last week, The Homebuyer’s Advocate Blog was used as a reference for a good article in the Columbus Dispatch by Jim Woods – Moldy Home Cost Builder $3 Million.
Jim put out a thorough follow up article about the moldy Maronda house and resulting lawsuit that has been in the news for the past few months.
Our very popular blog post (over 500 views) in late February reported on the same Maronda issue – Maronda Home Verdict Cost Nearly $3.2 Million.
I especially liked the way Jim “touched” on the Reynoldsburg Building Department signing off the home.
The house passes all building code requirements, but yet the south side of the house was not attached to the foundation and was inadequately attached on the other three sides. This was hilarious and sad all at the same time.
I’m sure I wasn’t the only person reading this article and saying “hmmm, how does that happen?”
How new homes pass building inspections & get occupancy permits is a mystery to most consumers & home owners.
I think the Columbus Dispatch has the start of whole other investigative exposé
I’ve heard many stories from experienced home inspectors that talk about the same problems and issues with homes passing building inspections.
For example, a home can pass plumbing & electrical inspections but yet have water leaks and no 
working lights. There are two main reasons why these problems sometimes happen with building inspections. First, many building inspectors just check to make sure homes are built to the correct specs, materials, items, hardware, clearances, etc. As long as a home is built to the correct specs and material it could possibly pass a building inspection. The second main reason why bad homes pass building inspections is human error. This happens even in spite of pressurized plumbing checks and other tests on mechanical systems.
I think it is about time to stop beating a dead horse. It is time to move past the issues of some new home builders in Central Ohio, like Maronda and Dominion homes. (Another Builder Casualty) The last few years, their issues have been thoroughly documented in every type of media & press publication. If you are an informed home buyer in Central Ohio then this is all old news.
The key phrase above is “if you are an informed home buyer“. I’ve been an Exclusive (true) Buyer Broker since 1996. I only represent residential and investor buyers. I’m sorry to say that the definition of a truly informed home buyer varies greatly. In most situations, a home buyer will spend only a few minutes researching the home buying process on the Internet sandwiched in between their favorite TV shows, American Idol and Dancing with the Stars. In one short evening a potential home buyer thinks they have thoroughly researched everything they need to know about the home buying process.
The reason this occurs so frequently is because researching on how to find the best representation possible for a home buyer is not fun and feels too much like work. Home Buyers just want to look at beautiful pictures of fabulous homes.
The first and most important decision a home buyer needs to make is who will represent them, NOT which home they buy or what builder to use. An Exclusive Buyer Broker (EBA) is the highest and best representation possible for any home buyer. Would an EBA been able to protect the buyer that purchased the moldy Maronda home. Maybe, yes or no. There are no 100% guarantees in life. A true Buyer Broker (EBA) isn’t always going to be a “Knight in Shining Armor”. But, we are the best base or foundation of having a successful home buying transaction.
On Tuesday, February 19, 2008, a couple in Franklin County Court won a jury verdict against Maronda Homes for nearly 3.2 million dollars. The couple, Roman and Jennifer Cosner alleged that Maronda Homes knowingly sold them a defective home. The jury verdict in favor of the homeowners stated that Maronda Homes did sell a defective home and that Maronda was aware of that fact. Maronda acted in an “unfair, deceptive or unconscionable” manner.
Maronda has always had a reputation for building the biggest square footage home possible at the lowest price. No other local production home builder can even come close to the price and square footage of Maronda Homes. There is usually a reason why this happens. It is not really complicated. Home owners should stop being so naive. You buy the lowest priced “anything” and you are going to have problems. I don’t care if you buying a new home, a 
toilet seat or a widget. You get what you pay for!!!! Like many home builders, Maronda has had it’s fair share of unresolved consumer complaints.
In my opinion, this could be landmark case for new home builders. The jury ruling in this case has now set a precedent for all future, similar cases. I would be really curious to see how this affects the policies and procedures of other builders in our area. I bet many builders are now “scrambling” to figure out how to adjust their business practices to deal with this jury verdict.
I’m glad the home owner had won their court case. But, I guarantee you, that they probably didn’t use an Exclusive Buyer Agent to help them purchase their new built home. If they had the proper Buyer Broker representation looking out for their best interest then this problem probably would not have happened. As consumers we have to be accountable for our bad decisions or lack of…..
Stay tuned for future posts on this topic.
HomeBuyer Advocate Mike
Representing People, NOT Property!
My Buyer Broker Advocate! 
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