Make larger payment on mortgage while in a chapter 13?

[huffydogg]

I am 1 1/2 years into my 3 year chapter 13, and I am paying back 1%, I've been able to save some money, and would like to make larger payments on my mortgage so that I can pay my house quicker. I am paying my mortgage outside my plan, but I am stripping my 2nd mortgage with the same bank as my 1st. I was wondering if it is safe to pay more on my mortgage or should I just play it safe and make the minimum payment? Thanks in advance

[Pandora]

If it were me - I'd simply bank the extra $ for now.... wait until you're plan is paid off, then use your plan payment to make the extra payments to the mortgage.

but thats just me

[keepsmiling]

I'd save that money for an emergency.

[momofthree]

bank it!

[HHM]

How much more can you really devote to the payment (and how much is the current payment)?

In general I agree with the others, just bank it; especially in a chapter 13.

However, depending on the amounts involved, it might be worth while to pay extra to the mortgage. Here are some scenario's where it might make sense.

1. Current mortgage payment is only 15% of your GROSS monthly income (GMI) and you already SAVE 10% of GMI. If you still have surplus funds, then consider adding another 5% to 10% of GMI to your mortgage payment. The cap is 25% of GMI to the mortgage. Note, you do not reduce savings to do this.

e.g. Current Mortgage payment is $1300, that would mean gross income is about $8,700 per month ($104,400 per year). Let's say the balance is $210,000 and the interest is 5%, and you are 3 years into a 30 year mortgage. The mortgage would be paid off in 2039. If you added 870 per month (10% of GMI), you would have the mortgage paid off by 2022.

2. Current mortgage payment is 20% of your GMI, and you already save at least 10% GMI, then consider bumping up mortgage payment by 5% of GMI, again, not cutting into savings to do so.

Granted, in a active 13, it is unlikely you are in those numbers, but at least it gives you some criteria to objectively evaluate what to do.

Depending on your interest rate and number of years left, you may be eligible for an FHA refi (there is a program for people in active 13) and consider seeing if you can get into a 15 year or 20 year mortgage.

[ksgirl38]

Can you invest the money in something? I'm thinking of a CD, even though the rates aren't great, but something that would allow you to cash out once you are through your plan and use the cash towards the mortgage. Savings accounts don't have the best interest rate. Just wondering if there's some way you could make some interest off the extra cash. Or is this not allowed in a 13? Anyone know?

[HHM]

Strictly speaking, surplus funds are disposable income, so there is a bit of an issue, but in general, trustees and the BK system don't care if you start making more money after the plan is confirmed. So, in that sense, you can do whatever you want with the money...e.g. stick in a brokerage account, etc.

The only time it comes up is if you are in a BK district that has you supply tax returns for each year of the plan, if the trustee sees a significant income increase, he can ask the court to modify the plan and increase the payment.