when looking at the statements how do i find out if the 4.5% is fixed or will balloon down the line? will that be on the standard monthly statement or will i need to look at the contract she signed?

fwiw, all 3 of my mortgages I've been able to pay off in full without penalty.

If this wasn't allowed you could never sell your house.

The loan statement should say balloon on it.

Recent regulation changes in the US have all but made balloon loans illegal on certain mortgage products. At this time I can't remember if Home Equity Lines of Credit (HELOC) are one of them.

If you have real concerns about the situation your sister has gotten herself into and feel some blame is on the loan provider you could lodge a complaint with the Consumer Financial Protection Bureau (CFPB).

If you pay back the loan early you should not incurr prepayment penalties.

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Yeah, you need to get the loan documents and read them over. If there's no prepayment penalty, refinance with a fixed rate new first mortgage for 75 or 80k.

If there is a prepayment penalty, make a judgement call on whether it's worth it in order to get rid of the home equity loan.

Sit your sister down with pencil and paper and explain to her how earning .75% in the bank and paying 4.5% for the loan is a losing proposition. Not to mention that making loan payments from the money she borrowed is also a losing proposition.

But first, depending on low long ago the loan was taken out, do some research on whether you can legally get it nullified. Whoever talked her into getting that loan was pretty much a criminal. Note that laws are probably different for mortgages vs home equity loans.

So in merica even when your on a fixed term ppl are sayin you cant pay penalty??

That surely has yo be incorrect otherwise everyone will ditch their products whenever they saw fit.

Taking out a mortgage instead of student loans might have been a mistake but I can't say since student loans are not something I know well.

Taking out a mortgage instead of a secured line of credit though is obviously a mistake. Presumably she doesn't need $150k right now but some portion of that at various times over the next two to four years depending on what kind of education she is getting. A line of credit would have allowed her to take just what she needs when she needs it allowing for either a lower monthly payment or if she truly can afford to devote 50% of her income to debt repayment it would have allowed her to graduate with little or no debt. Using a mortgage for this has increased her cost of borrowing the money for no reason.

I purchased my current home with a first for 30 years and a second for 10 years.

Two years later I paid off both with a new 30 year from a different lender and got a lower rate.

Three years later I did it again also paying off a HELOC I had. New lender with a lower rate.

Four years after that I refinanced with the same bank for a lower rate and a 15 year term.

I could do it again at any time. So, yes, I can ditch my product whenever I see fit.

Then you really shouldn't be offering an opinion on something you know nothing about, should you?

No, it's not incorrect. Once again, if you aren't familiar with U.S. financial laws, regulations, etc., it's best not to weigh in on a subject that requires such knowledge.

Fo someone who contributed 0% to op dilemma. Yo have a lot to say.

I bumped thread and kept it goin. And was honest about what I didnt know.

A lil class goes a long way my friend.

Regards.
Tops

$700 interest per month seems on the high side. If there's 150k outstanding, the interest should be around 4.5%*150000/12, which equals around $560.

mortgage interest is front loaded so you pay more at the beginning and less at the end.

What? You pay more at the beginning because the balance owed is higher.

This thread is getting pretty lollsy

This would have been the smarter play, but then she wouldn't have gotten to see 150k in her bank account!

i guess that makes complete sense. I always had it in my head that amortization schedules had a higher interest: principal ratio at the beginning so that the banks are realizing a return on their money faster since very few people go through the full 30 year life of the mortgage without selling or refinancing along the way.

Nothing in my post was incosistent with this observation. Notice that I prefaced my post by saying "If there's 150k outstanding, ...".

On a $150,000 loan, the only point at which the full $150,000 is outstanding is on the first payment. On all subsuquent payments less of the loan will be outstanding, and so interest payments will be lower anc capital payments higher. My calculation is the upper bound for the amount of interest in any repayment, and the amount is lower than $700.