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My current principle balance is around 240,000 / 5.1 interest

/ 1,700 monthly payment /...
My current principle balance is around 240,000 / 5.1 interest / 1,700 monthly payment / 28 years left. The co-borrower recently passed away and I got some insurance money. I want to pay off the mortgage in 5-10 years or just completely pay it off. My question is what is the best way to do this to fully benefit from this, to pay for least amount of interest. Should I do a "12 year no fee refinance" or should I keep the current mortgage and just pay more every month towards the principle payment, if so how much more should I pay to pay it off in 5-10 years. What is the best option?
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Answered in 4 hours by:
7/11/2011
Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 7,211
Experience: Extensive Experience with Tax, Financial & Estate Issues
Verified

Stephen E. Grizey :

The best option is to determine how much excess cash you have to put toward the mortgage, and then use that money to pay down the principal as soon as you can. In your situation, that will save thousands if not tens of thousands of dollars in interest over the remaining term of the mortgage.

Stephen E. Grizey :

Next, you need to determine how much of a monthly payment you are able to make and we can figure out how long it will take to pay off the remaining balance. There should be no reason to refinance in these circumstances unless you can obtain a lower interest rate. If there's a no fee refinance option, that reduces your interest rate then it makes sense.

Stephen E. Grizey :

That

Customer:

hi

Customer:

I can pay the whole thing and have a little bit left over. Should I pay the whole thing?

Stephen E. Grizey :

That's assuming that you would still have a significant amount of principal to amortize - ie pay off.

Customer:

total principle balance is 240,000

Customer:

should I just pay that amount?

Stephen E. Grizey :

The only reason I wouldn't pay the whole thing off would be to make sure I had an adequate cash reserve for emergencies. Generally, we advise a minimum of 6 months of expenses, assuming no income during that period. This might be the chance for you to establish that cushion if you don't already have that set aside.

Customer:

I would have around 50,000 left

Stephen E. Grizey :

Also, are you employed? Do you have any dependents?

Customer:

only my self and yes i am employed

Stephen E. Grizey :

How much of the mortgage were you paying before you lost your co-borrower?

Customer:

I will still be paying 1,700 a month

Stephen E. Grizey :

In this day & age we have to ask "Do you feel your job is secure?"

Customer:

with 2000$ a month salary

Customer:

not really my job is not secure

Stephen E. Grizey :

The question is, how much of the payment WERE you making before?

Customer:

If i pay off the whole thing i would have 50,000 in the bank and probably have to pay for 800$ a month

Customer:

I am on time everytime having food stamps and a side job

Customer:

I would loose my 58$ a month food stamp if I do pay off the whole thing

Stephen E. Grizey :

When you had the co-borrower was the payment split? Ie how much were you paying personally?

Customer:

I was paying the whole thing my self my mom had cancer didnt work she was helping with 300$ a month SSI

Stephen E. Grizey :

OK, if you pay it off you'll have that additional cash flow every month to use as a cushion also.

Stephen E. Grizey :

I thought the food stamp benefit was based upon income & dependents rather than expenses?

Customer:

It changed for some reason

Customer:

I also qualify for 58$ a month once my mom passed away

Customer:

I earn 2000$ a month with no dependent now

Stephen E. Grizey :

All that said, I'd pay it off; that way you'll only have to deal with real estate taxes & homeowners insurance & the other normal household/maintenance expenses

Stephen E. Grizey :

How old are you?

Customer:

22

Stephen E. Grizey :

OK, well you have your whole life ahead of you; you'll be starting off with a big boost having a house all paid for at such a young age,

Stephen E. Grizey :

Is the house in your name yet?

Stephen E. Grizey :

Are you an only child?

Customer:

I am the primary name and she was the co-owner

Stephen E. Grizey :

When did your mom die?

Customer:

I am in proccess to remove her name

Customer:

6/29

Stephen E. Grizey :

Sorry to hear that; its tough no matter when; I lost my Dad at age 21 & my mom to cancer 20 years later.

Stephen E. Grizey :

Do you have an attorney handling it?

Customer:

ya, lost my dad when i was 16

Stephen E. Grizey :

You are her only heir?

Customer:

ya

Customer:

Only problem is the car is in her name

Customer:

and her bank account has like 200 dollars

Stephen E. Grizey :

Are you her only heir?

Customer:

yup only heir

Stephen E. Grizey :

There should be an abbreviated procedure for the car.

Customer:

really?

Stephen E. Grizey :

Usually if you are the only heir you can either sign an affidavit to that effect or if she had a will a copy of that; the way to solve that the simplest is to check with the Insurance agent or Company & they will know how that is handled in your state.

Stephen E. Grizey :

Of course the lawyer should be able to do that too, but sometimes they like to complicate things when there's no need to;

Customer:

ok i will ask the car insurance company

Stephen E. Grizey :

that's your best best.

Customer:

and I will ask the bank on wut to do with her checking account

Customer:

and maybe a probate would not be needed?

Stephen E. Grizey :

Have you gone to college or a community college for an associate's degree in something that interests you?

Customer:

thats the plan, community college part time and full time work

Stephen E. Grizey :

Could you sign on the checking account?

Customer:

ya ya I have everything i can even take her money

Customer:

can i do that?

Stephen E. Grizey :

Technically no, once she died. But for a few hundred $, I'd just write a check & deposit it in my own account.

Customer:

can i just do a transfer, i have set up a transfer

Stephen E. Grizey :

If all she had was the car & a few hundred $, there shouldn't be a probate required anyway

Customer:

ok sounds good

Stephen E. Grizey :

If the house wasn't owned jointly with right of survivorship but was held as tenants in common, her portion of the house would have to go through probate to clear the title for you.

Stephen E. Grizey :

If it was held the former way, all you would need to do is file a death certificate

Stephen E. Grizey :

Was she on Medicaid?

Customer:

ya we are in joint and yes she was on medicaid

Customer:

but she was only 47 so I dont think she has to repay

Stephen E. Grizey :

joint or tenants in common?

Customer:

joint

Stephen E. Grizey :

so they can't get it anyway; it is your by operation of law;

Customer:

o ok

Stephen E. Grizey :

the lawyer should be squaring this away for you; trust me its no big deal & should cost you very much

Stephen E. Grizey :

should = shouldn't

Customer:

ok

Stephen E. Grizey :

If I can help you anymore, just ask for me "Steve G" usually works if you put that at the beginning of your question.

Customer:

ok sounds good, thanks for all your help.

Stephen E. Grizey :

Do you have any aunts or uncles?

Customer:

I do they all in another country

Stephen E. Grizey :

Oh boy, well you'll need to get "adopted" by some family to spend the holidays with; don't let yourself isolate; force yourself to keep moving; school is one of the best ways;

Customer:

I will do my best to have some friends and school for sure.

Customer:

She also has some money in another country and I will probably get a lawyer in that country to take care of it in the future

Stephen E. Grizey :

Good, its none of my business, but I've done a lot of financial planning over the years & you're in a tough spot, so look at all the pluses & work with the cards you've been dealt. Good luck, you'll do fine, you've got a good head on your shoulders; I can tell by your questions................

Stephen E. Grizey :

Please remember to "ACCEPT", it is the only way we get credit for our work. Feedback, if you have time, and bonuses, where you feel they are warranted, are always most appreciated. Thanks again for using our service. I'll be happy to answer any follow-up questions you may have.

Customer:

Thanks :) I try not to make a stupid investment and just pay off the house

Stephen E. Grizey :

Very Smart thinking, keep it up.

Customer:

Thanks for the chat. Appreciated.

Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 7,211
Experience: Extensive Experience with Tax, Financial & Estate Issues
Verified
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Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 7,211
7,211 Satisfied Customers
Experience: Extensive Experience with Tax, Financial & Estate Issues

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