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Mortgage Principal Issues

Why is my pay off more than the original principal

Hi. I just refinanced. I have 2/28 mortgage and I don't have prepayment penalty. Why is my pay off more than the original principal $134,235 change to $137,771.

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Bill's Answer
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I cannot be sure of an answer without more information, but I will make my best guess. If your original mortgage was $134,235, and you decided to refinance in a short period of time, your mortgage balance has likely not fallen very much. In the early years of a mortgage, most of your payment is going towards interest not principal. It is likely that in 12 months, your mortgage balance reduced by less than $2,000. But wait, how come your new mortgage balance is $3,000 more than the original balance, not $2,000 less? This is most likely due to the fees and closing costs associated with refinancing your mortgage. Every time you refinance your mortgage, there are fees involved.

You can find the details of these fees on the HUD disclosure statement. They may include an origination fee, an appraisal fee, a processing fee, an application fee, a discount fee (if you "bought down" the rate). It would not be unusual to see all of these fees add up to several thousand dollars.

Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs.

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2 Comments

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  • BA
    Jan, 2009
    Bill
    Please see here: http://www.bills.com/default-on-second-mortgage/.
    0 Votes

  • 35x35
    Jan, 2009
    Ken
    I have a mortgage and equity loan on my home. Since the equity loan firm will not help me in anyway to refinance for a lower rate, what would happen if I just stopped paying them? They are not my primary. I am not late on either. Thanks.
    0 Votes

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