Real estate???

[banjoreid]

would like know from other members about their experiences and any advice that can be offered for some one looking to buy a home. The specifics I am after how ya'll have went about finding something meet your needs. Did you search (zillow.com or any similar sites) yourself, utilize a realator??

I am at minimum in need of a two car garage, of course more would be better.

Any advice would be greatly appreciated.

 

[sean Buick 76]

Here are my tips:

1. Get pre-approved for a mortgage that is the maximum you are comfortable with. This way you can be ready to pull the trigger when you find the right house. We had a mortgage secured when we started looking, so that meant no way we were going to end up broken hearted by not getting approved AFTER finding a house.

2. Know the market. Look at a lot of homes and track what is selling and what is not and you will begin to see which houses are overpriced.

3. Personally I had great luck with finding a good Realtor that my wife and I trusted... He was representing the seller on a house we were looking at and although we did not like that house, we felt comfortable with him and asked him to help us find a house. They have the inside scoop on houses that have not yet hit the market and a good Realtor is a pleasure to deal with!

4. Buy once and buy right! Personally I am not interested in buying a house and then selling it in 5 years to upgrade. We bought a house that would be adequate for 20+ years.

5. Find a good home inspector, once with experience building homes is my preference as they know what shortcuts builders make.

 

[75gmck25]

If you are in a reasonable sized population area, finding a good realtor is probably the best choice. You can continue to check the ads out yourself, but the realtor is motivated by commission and will work to find what you want. If you are in a rural area the real estate process often works differently. They have fewer customers, so commissions and customer interaction may be different.

If you have a lot of time and patience you can also save by looking for a bank short sale (owner won't get enough money to pay off the house) or a foreclosure. You can get good deals that way; however, you are dealing with a bank (not an owner) and they have more time and less motivation than you do. For them its just a business deal, but for you its somewhere to live. I would not try it if you want to close quickly.

Bruce

 

[dlcwent]

You've got some good advice so far. I would like to add something. When you find "the place", find about the neighborhood. You've got to live around these people. It might be useful to meet some of your neighbors and talk to them first. They could save you a big heartache. Don't find out after you move in that the people next door party every Tuesday night until 4 AM. And you other neighbor target practices all day on Sunday. Just a thought.

 

[Koken]

Shop location, location, location first.

Try to buy the cheapest house in the neighborhood. It will retain value more than others.

Buy what you can afford.

Think about add-on's later. People always whine about small things. You can always change them later as time goes on.

And, don't BS with the sellers on offer or try to nickel & dime them. Offer fairly based on market conditions.

 

[jimmybread]

Sean buick 76 covered anything i would have said. A realtor working for you is very helpful.

 

[HoosierMark]

One other thing to add. When you find a house you like, ask your Realtor to give you some comparable sales and listings similar to the property. This will let you see what the real value of the house is. If the Realtor does not want to do this ask yourself why. Is this house over priced or is the Realtor lazy, either way you need another Realtor.
When you find a property determine what it is worth to you and what you are willing to pay. Then do not go above that number. Also when you are thinking about this ask yourself how you will feel when you drive by it if you do not buy the house. Will you be sad or will you be OK not paying what the seller wanted. ( will you wish you had been willing to pay more when it sells to someone else?)

 

[Moose02]

When you find a property determine what it is worth to you and what you are willing to pay. Then do not go above that number.

Actually find out what market value is at the time your buying and is the area prices going up down or holding. If you have kids check the schools and local service. Taxes will be a consideration also if the house is right and taxes are over the top believe me they won't go down. The right Realtor will make the difference and should be able to get you all the info you need about price, taxes, closing costs, title issues, mortgage pre qualification. There is a difference between a Realtor and a Real Estate Agent. PM me if you want any more info.

Glenn

 

[Beemer533]

Here are my tips:

1. Get pre-approved for a mortgage that is the maximum you are comfortable with. This way you can be ready to pull the trigger when you find the right house. We had a mortgage secured when we started looking, so that meant no way we were going to end up broken hearted by not getting approved AFTER finding a house.

2. Know the market. Look at a lot of homes and track what is selling and what is not and you will begin to see which houses are overpriced.

3. Personally I had great luck with finding a good Realtor that my wife and I trusted... He was representing the seller on a house we were looking at and although we did not like that house, we felt comfortable with him and asked him to help us find a house. They have the inside scoop on houses that have not yet hit the market and a good Realtor is a pleasure to deal with!

4. Buy once and buy right! Personally I am not interested in buying a house and then selling it in 5 years to upgrade. We bought a house that would be adequate for 20+ years.

5. Find a good home inspector, once with experience building homes is my preference as they know what shortcuts builders make.

Excellent advice!

I will add a comment regarding #4:

This largely depends on your age, financial situation, etc.. My wife and I were in a very stable situation (we both work for the same company) 6 years ago when we bought our first house (which we are still in).

We prequalified for a pretty high mortgage before we started looking around, but we decided to go for a mortgage that either one of us could afford just in case.. we didn't want to be "house poor" or worried about paying the mortgage if one of us lost our job...

Fast forward to 3 weeks ago and after surviving 4 RIFs, my wife lost her job... You never know!

That being said, there is nothing wrong with a "stepping stone" home IMO. I think it is very difficult to find what you want unless you can just afford to buy exactly what you or you build..

My garage is too small, I don't have enough property, house is too old, etc... I complain a lot, but in reality, this house is fine, the taxes are cheap (relative to other areas in NY) and the mortgage is easy to handle allowing us to save for building what we really want..

I will add that a good inspection is crucial! Ours missed a lot of stuff...

 

[brycez28]

In addition to above, I always looked at the property tax. Talk to the neighbors. Find out if their are any rentals in the immediate area. Crappy renters can make life outside miserable.

 

[volleyball]

I say figure out where you want to live. And then if you can afford to live there. Pick 2 or 3 areas. What kind of houses are available there? Go to several open houses of different types of homes if you are not familiar with them to see what style and size fits. Don't get caught up in we need 3000 sq ft. for 2 people. Now if you are the Duggards, that is different.
I agree with beemer in this is not your last house. Unless you have the money to buy the place of your dreams.
Do you really need a 2 car garage? Already built? Maybe a house that has land to build that garage. Now if you build your dream garage, you might have to go with Sean and it's your last house.

 

[TTTTTT]

Especially if you are a first time buyer, try not to go on emotion. Excited yes but keep in control and always look at it as an investment. You will always get good return in the long run if you plan to stay for awhile. Quick flips are hard unless you have the skill and can do most of the work.

 

[yeldogt]

All good advise ....... Beemer553 has a good take.

Many base "what they can afford" on the 30 year very little down mortgage ... the 30 year is a value trap IMO .... never building equity.


In my early 20's I bought a small somewhat outdated starter home -- one I could easily afford ... in one of the best towns around me .... from an estate. You will never loose any money with a small house in a good town..... you will also get a better percentage of anything you put into it.

Often, people starting out, purchase the wrong house (too big - wrong town) and put way too much time and money into it .. and are trapped.

 

[sierradmax]

With the above... As a contractor, I look at build quality. Even though I have to use a licensed home inspector, I do a better job than what they usually charge me for. I look at the wiring at the panel. I look at plumbing below sinks, heating system, attic & basement framing. Just to name a few. Many of the items that tell me the house was built well and the contractor didn't skimp on things. Good luck.

 

[wornoutoldman]

Skip the mortgage "pre-approval" they aren't worth the paper they are printed on. Rather get a mortgage approval contingent on finding a suitable home. In other words line up the lender and provide them all your financial information and required paperwork before looking at any homes.

Then you truly will be able to make a solid offer.

 

[finn]

Find a good Realtor: There is no reason to limit yourself to a FSBO, as most people selling without a Realtor simply try to pocket the commission. Let the Realtor do the legwork.

Nothing wrong with a starter home. It's good to keeps money in your pocket and allows you to build a financial portfolio if you aren't stretched, and allows you to be able to afford to do things other than feed the mortgage when you are young.

Schools are extremely important, even if you don't have kids. A nice home in a bad or even mediocre school district has limited marketability when it comes time to sell.

Keep your commute reasonable. Driving an hour each way to work gets old and is incredibly expensive. Remember: fuel is the minor cost in a commute.

 

[Wood'nMetal]

Avoid Zillow/Trulia/etc for your search. Information is not accurate or realistic.

Use realtor.com or your local MLS public feed to do your search.

Find a REALTOR you trust and let them do their job.

 

[Whitworth]

My advice is to make a list of needs for your search that YOU want, not your mother in law, or brother in law or the guy who works one cubicle over from you. You can work with or without a realtor. MLS is effectively obsolete as you can search online at your convenience and then contact the listing realtor of the property you want to see. Working with realtors is a mixed bag of usefulness, they can recommend so much but not really get down to the nitty-gritty because of laws against red-lining. Like all salesmen, their main function is to tell you what you want to hear. Not to say there aren't good ones, but that they are looking to make money just like everyone else.

Gary

 

[GarageWarrior]

Check out NY Time rent vs buy calculator:

http://www.nytimes.com/interactive/...gion=Marginalia&pgtype=article&abt=0002&abg=1

Depending on what your numbers are - renting can actually end up costing less.

For buying a house - I'd take local real estate agent over Trulia and Zillow. Those websits are Ok if you are just looking for general info - but sometimes they have erroneous listings, and they can be slow to update - taking as long as 10 days to propagate data from MLS. That delay is unacceptable when you are ready to put down an offer, looking at a new Zillow listing only to find out that the property is already off the market because it's been listed on MLS a week ago and is now pending sale.

 

[Beemer533]

I will add another comment regarding the way my wife and I calculated what we wanted to afford for a mortgage; we added in 2 extra payments a year.. in the long run this makes a big difference, especially if you can start right away (this saves the most interest). I know a lot of folks that bought their Mcmansion and could barely afford the $2500 mortgage, much less put a dime extra...

We also got a better rate by doing automatic withdrawals and paying bi-weekly..

As to whether or not to use an agent; it depends on how much free time you have to put into this...

My wife and I didn't have a lot of extra time (I travel constantly) so an agent was well worth it. We used a recommendation from a good friend and it worked out very well. We actually used him again to sell our FIL's place..

I would say that the other benefit is there several databases that you will not get access to without a realtor.. A lot of properties are not listed "publicly"...

 

[elav]

To expand on Beemer533's comment - mortgages are typically monthly so that would be 12 payments per year. By paying bi-weekly, you are making 26 half payments which is the equivalent of making 13 full payments. You don't have to do bi-weekly, you just have to make an extra payment per year. This will bring a 30 year mortgage down to 22.5 years.

A few other comments. Someone already indicated location, location, location. To expand on this, buy in a great school district (even if you aren't planning on having kids). Don't buy the most expensive house in the neighborhood and you will most likely be purchasing a "starter home". Most people think of a starter home as a house they will have for roughly 5 years but let me tell you that those 5 years will fly by and you will most likely be in that house 7-10 years. Make sure you have at least 20% down (no PMI!) and do a full budget to understand how much the house will cost (including maintenance, taxes, etc.). You don't want to be house poor! Based on your interest of this forum, I would also add that I have always purchased fixer-uppers at a lower price as I didn't want to pay for someone else's tastes. If you are considering a fixer-upper, know what kind of fixer you are. Structural stuff is much different than changing out fixtures. Also finish carpentry is a true art that I now respect but haven't mastered yet. This last comment might not be popular, but in most places garages don't add as much value per sq-ft as living space (and garages are cheaper to add on than living space too). So even if you are targeting your "dream garage" I personally won't do that at the expense of having a house that works for you and your family. Also, figure out your max price and only work with a real estate agent that will only show you houses in your price range or above your price range if they think the price can be talked down.

 

[Fishplate]

We prequalified for a pretty high mortgage before we started looking around, but we decided to go for a mortgage that either one of us could afford just in case.. we didn't want to be "house poor" or worried about paying the mortgage if one of us lost our job...

Fast forward to 3 weeks ago and after surviving 4 RIFs, my wife lost her job... You never know!

This times 1000!

Two months after buying our house, I was out of a job and looking for work. If I had not married a woman who was smarter than me, I might have fallen into that trap. As it was, we could comfortably make payments on just her salary, leaving me time to job hunt and add value to the home in my spare time. Three years later, we sold the house and doubled our money...and had enough equity to buy a much nicer home, which is all paid for now...

 

[ratdoggy]

To expand on Beemer533's comment - mortgages are typically monthly so that would be 12 payments per year. By paying bi-weekly, you are making 26 half payments which is the equivalent of making 13 full payments. You don't have to do bi-weekly, you just have to make an extra payment per year. This will bring a 30 year mortgage down to 22.5 years.

One thing I'll add is take out a 30 and pay it off in 15. Just in case you run into some financial trouble you won't be killing yourself to make the "mandatory" higher payment.

I also have 1/4 of my mortgage payment taken out of my checking account weekly. That does two things. I'm paying it off quicker and I don't need to scramble at the end of the month ( I'm not disciplined and realize it's easier to do it this way)

 

[sean Buick 76]

Skip the mortgage "pre-approval" they aren't worth the paper they are printed on. Rather get a mortgage approval contingent on finding a suitable home. In other words line up the lender and provide them all your financial information and required paperwork before looking at any homes.

Then you truly will be able to make a solid offer.

Thanks for catching that, thats what i meant when i said pre approval....

 

[ratdoggy]

Keep looking because the house is out there that you want.....
Do not settle (within reason of course) I looked at over 100 houses before I bought my last one. I had (to me anyway) weird criteria
I didn't want the "turn around" driveway as I had that and it sucked
I wanted to be deep in the subdivision as there is less traffic.
I wanted to be somewhere that couldn't have a commercial building go up pretty close
I wanted a poured foundation
I also wanted a garage bigger than the standard 2 car
I wanted Natural Gas, sewers and city water too as I had oil heat at the last house

 

[volleyball]

I think people have gotten smart enough to avoid the bi weekly. Every person I knew that did it ended up spending more money. They hit you with fees if anything happens.
I say don't pay off the mortgage early. It should be the last debt you pay down. Depending on the market, investing could give you a higher return. You get to deduct your mortgage interest, not all those others.

There is no right answer for everyone. We are all different. But a lot are close enough that you might find someone who has the perfect formula for you.
Location, time, where you are in your life and many many other things all make out what works best.
I bought my first house young, but I don't think the same would be good for my kids. It worked for me but my life is different

 

[yeldogt]

ratdoggy: Normally the rates are higher for the 30 -- so you will still pay a premium. I always advise on a smaller house with a shorter term when first buying.

Volleyball: If you have a short term mortgage 15 to 20- - then you are paying off at what is a reasonable cost .. and the 20 normally gets you almost to a 15 rate. Many people with your thinking purchase with a 30 year and in the end pay a huge penalty. Compound interest on a mortgage is extremely expensive early on .. and should be minimized.

A house properly paid off then allows for accelerated investments ... we have lots of data on who ends up with more money.

 

[Clik]

I have a house for sale 18+ acres with a fairly new 40X80 building with concrete floor in Southern Maryland but most realtors are women and I don't think most of them relate.

I've had some show the house to families and never took the potential buyers down to the shop to show the building. I'm sure the potential buyers assumed the shop listed was the two car garage attached to the house.

 

[over40pirate]

We just bought a house.
I would check Realtor.com often.
Also contact a few Realtors in your area, and see what they have available.
Try to deal with the listing broker. That way the broker doesn't have to split the commission with the listing broker.
I bought a house one time from a listing broker, and after an offer, counter offer, counter offer, the seller said that was the lowest he would go.
I told the broker that I would pay $2000 less, and I didn't care if the seller came down, or the broker paid the $2000 difference. The broker did, and we bought the house. If the broker was only getting 1/2 of the 6% commission, they wouldn't have been willing to kick in the $2000.

 

[bobemmerich]

Lots of good advice here. I just went through this in July, so here's my .02
1)Do some looking yourself(ves). I started the search 6 months prior to our buying. Go to open houses in your area (doesn't cost anything and gives an idea of what's out there) and see what gets you what. Even if you know a house is too pricey, check it out anyway. It will give you an idea of different styles/materials/sq. footage, etc. Just because a house is xxxx sq ft, doesn't mean it's laid out well.
2)Find a Realtor you feel comfortable with and don't be afraid to ask questions
3)A Home Inspector who you are comfortable with. Preferably someone with contracting experience
4) Don't go crazy with a mortgage-A "Pre-Qualification" most likely will be much higher than you may be able to afford. Consider taxes, insurance, sewer fees, etc...
Good Luck with your search.

 

[Beemer533]

I think people have gotten smart enough to avoid the bi weekly. Every person I knew that did it ended up spending more money. They hit you with fees if anything happens.
I say don't pay off the mortgage early. It should be the last debt you pay down. Depending on the market, investing could give you a higher return. You get to deduct your mortgage interest, not all those others.

There is no right answer for everyone. We are all different. But a lot are close enough that you might find someone who has the perfect formula for you.
Location, time, where you are in your life and many many other things all make out what works best.
I bought my first house young, but I don't think the same would be good for my kids. It worked for me but my life is different

I'm not sure about the comment ", smart enough to avoid" biweekly payments, but the bank offered a half point to do biweekly, so why not?

I'm not sure how they ended up paying more? We get an extra payment every year without doing anything, so our 30 year, is actually something like 22..

 

[ratdoggy]

ratdoggy: Normally the rates are higher for the 30 -- so you will still pay a premium. I always advise on a smaller house with a shorter term when first buying.

Yes you are better off doing it that way but how many people can afford the extra $200 per month (assuming the house costs about $100K). My thinking is that if kids come, or job loss happens you are in a better position with a lower payment. Of course why doesn't everyone pay cash and forget the mortgage. That would be the best scenario

 

[sublimate]

Of course why doesn't everyone pay cash and forget the mortgage. That would be the best scenario

Yes, that is the best way. Debt-free is the way to go.


To the OP (if you're actually still around): why don't you post the area you're looking in? There's enough of us spread around the country we may have some suggestions.

 

[yeldogt]

Yes you are better off doing it that way but how many people can afford the extra $200 per month (assuming the house costs about $100K). My thinking is that if kids come, or job loss happens you are in a better position with a lower payment. Of course why doesn't everyone pay cash and forget the mortgage. That would be the best scenario

Most people ... and especially young first time buyers don't do all the math ... they don't understand how costly the 30 year is and then often PMI on top of that. Agents and lenders then talk about .. refinancing if the rate they give you is not great today ... that just adds to the cost.

People should price out what they can borrow with a 20 year without PMI -- and see if that is available. That way they understand going in what penalty the are paying .. and 7 years with PMI you don't have any equity.

 

[Platonic Solid]

banjoreid, this is your first post, please chime in to let us know we're not talking to the wall.

Download this Home Mortgage Calculator Spreadsheet and play with it.

Interest rates are still very low. Go conventional 30 year fixed, standard monthly payments. That gives you the freedom/option of paying down the mortgage faster if/when you want, on your terms. Don't even consider a 15 yr mortgage unless PITI (Principle+Interest+Property Tax+Home Owners Insurance) is 1/3 max of your NET monthly income.

If this is your first property purchase you probably qualify for any number of first time home buyer programs. A good bank and realtor can walk you through your options. Yes, you can still buy houses with no money down, but there are always strings attached. Make sure you understand all the terms.

Avoid PMI (Private Mortgage Insurance) = Money collected by the bank to buy insurance for money borrowed above 80% LTV (Loan To Property Value). Yes, there are gov't programs that let you buy houses over 80% LTV with no PMI. Again, make sure you understand all the terms.

Before you get too serious about this, you need to fix any financial issues you may have. If your FICO (Credit) score is 720+ then you're good to go. If not, then fix it or your interest rate will be higher. Any debt you currently have will significantly reduce the amount of money the bank will lend you. Pay off all credit cards. If you are paying interest on outstanding credit card debt, you're not ready to buy a house. For every $50/mth debt you have, the amount you can borrow drops $10,000. Thus, a car payment of $300/mth reduces the amount of money the bank will lend you by $60,000.

If you are very financially responsible and the bank permits you to do it, pay your own taxes and insurance. This requires an exceptional credit score and the discipline to save money for these future bills. I'm sure everyone here is questioning this one. Here's why: The bank can and will collect 12% more than they need for your property taxes. Yes, you will eventually get that back the next year, but meanwhile you're still paying 12% more all the time. Now let's imagine a scenario where for some reason you don't have enough money to pay your full PITI payment, so you send in only enough to pay Principle and Interest, but can't pay the Tax and Insurance installment (the tax and insurance bills are usually payed by the bank every six months, so it's not like they need that money right now anyway. It's your money just sitting there in escrow). They will apply your partial payment in the following order: Tax - Insurance - Interest - Principle. Thus a Principle and Interest only payment made on a PITI mortgage will incur a full late payment fee making your stressed financial situation even worse.

I have a lot more to add, but will wait for the OP to chime in and let us know that he's actually reading this.

 

[sean Buick 76]

Yes you are better off doing it that way but how many people can afford the extra $200 per month (assuming the house costs about $100K). My thinking is that if kids come, or job loss happens you are in a better position with a lower payment. Of course why doesn't everyone pay cash and forget the mortgage. That would be the best scenario

For sure it is WAY better to buy a house with cash but 95% of people will have to save up for many years to do that and how much money in rent will be paid over those years? It all depends on the housing cost vs income as well.... Here an average house is 400,000 but average income is pretty good, not good enough to buy cash though for most of us.

 

[banjoreid]

To all that have provided input I greatly appreciate it.

As requested, which should have been provided first off, more details for my situation.

As for family, its just me. I will solely be responsible. I am pretty dead set on a 30yr mortgage as I am wanting to turn the property into a rental once I move. Location would San Antonio or surrounding. I am an active duty Soldier so moving in a few years is inevitable. At the same time I do not want to be house poor or create a hardship on myself (people with military backgrounds will understand pay fluctuations due to entitlements while being single). My top priorities are garage space and an good school district. The school district I am relying on as a attraction points for renting. The commute is of also a concern due to being military and being salary i dont want to drive 40 mins work 12 hours five days a week. To touch on San Antonio again I have been stationed there before and am rather experienced with the city. I am looking to pull the trigger between March to 1st part of June.

Again thank you to everyone. BEEMER you provided quite some good insight.

 

[Platonic Solid]

I think we all know the faster you pay off a loan the less interest you pay. With today's low interest rates it's smarter to borrow long term. A $100,000 30yr mortgage can be reduced to 25yr by making additional $50/mth pmt. You will save about $10,000 in interest after adjusting for tax write off. However you could be saving that $50/mth towards you next house purchase. If you commit from the beginning to the bi-weekly plan, you're stuck with it. And, as stated, that $50/mth extra reduces your borrowing power for the next house purchase $10,000.

... I am pretty dead set on a 30yr mortgage as I am wanting to turn the property into a rental once I move. ...

Strongly agree. That is what every first time home buyer should do. It's what I did and why I now have 2 properties. I do not make money off the rental property. It is self supporting, meaning I charge what it costs me PITI plus a little for maintenance. Keeping the rent low will help get and keep the tenant that you want = long term and reliable. I have had the same tenant for 14 years. She takes good care of the place because she knows it's a bargain. When you apply for the mortgage for your second house, the bank will take the rental income and multiply by 75% before adding it to your regular income. You are allowed to deduct all of the mortgage interest and taxes for 1 rental property. The rules become less favorable if you own more than 2 properties.

 

[Jinks]

Be wary of everyone involved in selling you a home. A bad realtor will lie to you about everything. A mortgage pre-approval will tell you you can afford a multi- million dollar mansion (they don't have to make the payment). The seller will tell you that sink hole is the start of the new swimming pool. The only person you can trust is yourself.

That being said, a *good* realtor can be a big help. But first DO THE MATH! A home is usually the largest single item purchase a person makes. DO THE MATH to figure what payment you will be comfortable with. Make it smaller than the max payment you can handle. After you make the purchase you can add the extra amount to any payments you make (if you make sure there are no pre-payment penalties in the contract). Every extra dollar you pay reduces the principal & the interest on the next payment. If you're going to pay off early make monthly extra payments. Vollyball has a point that from a strictly financial point of view paying a mortgage without prepayments makes better sense. OTOH, getting rid of a mortgage works for a lot of people. I paid a 30 yr. off in less than 10 yrs. That enabled me to buy the next two with cash.

When you find some houses that fit your needs look into their history. All tax records are public. You can go to the county & get the tax records, & a lot of counties have their tax assessor records online. That will tell you how much the owner paid for the property & what others in the neighborhood are selling for.

When you pick one to make an offer on wait for a really rainy day. Go by the house in a rain storm, you don't want the house at the bottom of the hollow. Don't be afraid to offer considerably less than the asking price. You can always increase your offer so why not find out how low the seller will go..........

 

[Platonic Solid]

... Every extra dollar you pay reduces the principal & the interest on the next payment....

I don't think you really meant to phrase it that way, since making an extra principle payment this month has absolutely no effect on the regular P+I payment due next month. It's called "principal curtailment" which reduces the total interest paid and the length of the loan term, it doesn't reduce your monthly payment.