Mortgage Relief Formula: Using Amortization Spreadsheets to Make Big Money

Trying to get loan modification help but finding it difficult to understand your banks guidelines and approval process? Homeowners who are in the middle of applying for a loan workout, or who are wondering if they might qualify for a loan modification need to know a few important tips that will make the process easier to understand and give them the inside edge for quicker approval and mortgage relief formula. Once you understand a few basic guidelines, you will be able to complete your paperwork so that it has a greater chance of approval and be on your way to a fresh start with your lender.

Here are 6 helpful tips that will work with any lender to help your loan modification application get approved: You must know your lenders guidelines for loan modification approval. Each lender has a formula that they use to arrive at an acceptable modified payment and your application must demonstrate that you can meet this criteria. The federal stimulus plan, called Home Affordable Modification, has standard guidelines for everyone-learn what these are and you are on your way to success.
Learn how to calculate your debt ratio so that you can figure out a monthly budget that implements your new modified payment and falls within your banks guidelines. For example, if your lenders guideline is a new payment that equals 31% of your gross monthly income, then prepare your loan modification application so that the new payment equals 31% of your gross income to meet the banks qualifications.

An example in big money saving- This method will work with any mortgage, but for our purposes, we’ll use these fictitious numbers. We have a mortgage of $225,000. The interest rate is 7.25%, and the length of the mortgage is 30 years. When we enter these numbers into our amortization calculator, we find the monthly payment to be $1,534.90. When we look at the first payment on our spreadsheet, we see that out of this $1,534.90, $175.53 goes toward principal and $1,359.30 to interest. When we look at the second payment we see, $176.59 will go toward principal and $1,358.31 will go toward interest. If we pay the second payment’s principal part, $176.59 upfront, or at the same time as the first payment, we will save the $1,358.31 in interest. Why do we save all this money? Because after we make our first payment, we will have a balance remaining on the mortgage of $224,824.48. The difference between how much interest we pay for borrowing this amount of money for 359 months and 358 months is $1,358.31.

There’s a special module for the homeowners who are unemployed. Further, a specialized contingency plan under the modification program has been devised for the homeowners who are not able to pay the mortgage payments on time. This module also prevents the home from foreclosure. Remember, Obama’s loan modification program has been designed to give benefits to the homeowners.

Here, you’ll see that principal part of the payment is $515.93. If we add this amount onto each of our payments from the first payment of our mortgage to the 180th payment of our mortgage, the mortgage would be paid in full in 180 payments, or 15 years. $515.93 may seem like a lot to pay upfront, but even if you were to take the principal part of payment number 55, $243.00, and add it on to each payment, you would have your mortgage paid more than 10 years sooner. Summing it up, you can use this as an approximate formula: On a 30 year mortgage, add to each payment, the amount equal to the principal part of payment number 180 and you will have the mortgage paid in 15 years. Or, add to each payment, the amount equal to the principal part of payment number 55 and you will have the mortgage paid in 20 years. While this formula doesn’t work perfectly for interest rates over 10%, for interest rates around 7%, it is fairly accurate. Now, let’s see how to turn that savings into wealth.

Learn more about Obama Mortgage Relief Plan Qualifications.