• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sonoma County Mortgages

Contact Us About Mortgage Financing

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now

Search Sonoma County Mortgages

  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • About SCM
  • About Scott Sheldon

Primary Sidebar

Sonoma County Mortgages is a part of New American Funding

New American Funding - NMLS #6606

Get Your Latest Rate Quote Now!

How Mortgage Interest Works

October 9, 2015 by Scott Sheldon

Share on Facebook Share on Twitter Share on Pinterest Share on LinkedIn Share on Email
Mortgage Sign Art Image

Mortgage interest is a double edge sword, on one hand it’s a tax-deductible expense, but by and large it is the heaviest cost of homeownership. What to pay attention to if you have not done a mortgage in a few years or bought a home before.

Interest Works The Opposite Of Rent

The amount of money you’re borrowing is based on a certain interest rate paid over the term of the repayment e.g. 360 months on a 30 year fixed rate. The longer the term the more interest you pay, spread out over the entire term whereas a shorter-term loan is more condensed with a higher payment, but you pay less total interest over the term. Like rent, loan interest is paid in months. Each month on a principal and interest amortizing fixed rate loan, part of your payment will go to principal with the lion’s share going to interest. It is not until year ten, the inverse occurs and more of your payment will start going to principal as the loan will be paid off in the duration of the 20 year term left of the original 30 year note.

Rent is due on the first of the month for that month’s obligation. Mortgage interest works in arrears. When you make your mortgage payment at the beginning of the month, it is for the interest of the previous month.

When Refinancing

Your principal balance on a credit report or mortgage statement is not a pay-off amount. The payoff is always higher than the current principal. The reason for this is because the lender being refinanced must estimate the amount of interest they need to collect in relationship to when they will be paid off with your new loan. The simple way to estimate a payoff when you refinance your home is to add a mortgage payment to your current principal. While this is not a hard calculation, it is a safe budgeting estimate you can use conjunction what you want your new loan amount to be.

*Recent Loan Payments Count-if your loan is closing just after the first of the month and you’ve already made your mortgage payment, expect those monies refunded to you post closing or reflective in the payoff amount. Most mortgage loan servicers are nimble enough to tie your most recent loan payment to the payoff amount. This is also a good strategy to employ reduce your numbers at loan settlement (escrow closing).

*Skipping A Payment-refinancing your home does not mean you skip out on the debt for 30 days. Let’s say you close your loan October 15, your new lender will begin charging you interest from the date they fund onward. This means you begin incurring interest from October 15 through November 1 with your first payment on the new loan not being due until December 1. While you do not make a payment in the first month after refinancing, you are still paying for it in interest the following month when the payment is due.

Buying A Home

The same interest concept applies. Your loan estimate will show the amount of prepaid interest your lender is using to estimate for the amount of time it will take for them to close escrow on your new loan. The prepaid interest amount can be adjusted based upon your closing date. Referencing our October loan closing examples, if you’re loan closing just after the first of the month, say October 5, you won’t have a mortgage payment to make on your new loan until December 1 because all of the interest for November will be reflected in the December 1 payment and the interest will be collected for October’s interest at closing in the form of prepaid interest. Interest is a driver of cash to close and is a re-occurring cost meaning it’s an ongoing expense of homeownership just like property taxes or insurance.

The more informed you are as mortgage borrower the smarter choices you can make when applying for a home financing. Remember if something does not jive within the origination of your loan, ask your loan professional. They should be able to clearly explain any and all related mortgage interest questions with your loan scenario.

Looking for mortgage loan financing help? Begin by getting a complementary mortgage rate quote online today.

 

 

 

 

 

 

Related Mortgage Advice from Scott Sheldon

  • Comparing Mortgage Rates In Sonoma County

    What to look for in comparing mortgage rates in Sonoma County. The Federal Reserve came…

  • Sonoma County "Best Rates"

    Sonoma County Best Rates:there are two ways to look at them. Most consumers look at…

  • 30 Year Mortgage Rates At 3.25%? Hmmm Not So Fast Cowboy!

    So is it true 30 year mortgage rates are at 3.25%? Well that depends on…

  • 2017 mortgage rate environment
    The 2017 Mortgage Rate Environment

    The mortgage industry has gone through some changes in the last three months. If you…

Filed Under: Interest Rates, Loan Programs, Loan Qualifying, Mortgage Shopping Tagged With: mortgages, refinancing, sonoma county home buying, SONOMA COUNTY LOANS, sonoma county refinancing

Get Sonoma County Mortgages News and Updates in Your Inbox

Footer

SCM on Facebook

SonomaCountyMortgages.com

Connect on Facebook

SCM On Instagram

Follow Sonoma County Mortgages on Instagram

Follow on Instagram

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

See Reviews on Zillow

Location & Contact

Sonoma County Mortgages and New American Funding are an Equal Opportunity Housing Lender

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
2455 Bennett Valley Road C107
Santa Rosa, CA 95405
1-707-217-4000
View SCM Map | Email Us!

Map of Sonoma County Mortgages New American Financing Office

View Map on Google

Copyright 2010–2023 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing (Opens in New Window) | Privacy (Opens in New Window)
Terms of Use (Opens in New Window) | Electronic Consent Agreement (Opens in New Window)
Opens in new window Opens an external site Opens an external site in a new window