Mortgage Payments

[Vinny1]

I currently have a fixed rate mortgage on my house with 24 years left until it is paid off. I won't mention the bank name that I make my payments to, but it is a large publicly traded bank. I usually pay my mortage a few months in advance, and then the bank immediately sends me a bill after I make a payment. For the second time in the last several months, they processed my mortgage payment incorrectly. Instead of applying it as a regular payment with some going to interest and some going to principal, they processed both payments as going to principal only, which means if I didn't call their customer service wondering where my next bill was, I would have been late on both payments, and assessed a late fee. I don't know if they are doing it deliberately to try to get me to pay a late fee, not that I would, or if their processors are just morons. Can I sue if it keeps happening?

It reminds me of a story that I heard in the past when some credit card company would shred their customer's checks and then charge them a late fee for not sending in their payment.

 

[the1]

Set up electronic withdrawals and make additional payments and it will solve this problem. I do the same thing you do and have my mortgage with a big publicly traded bank. On the 1st of each month my scheduled payment get withdrawn from my checking account, regardless of the additional manual payments I make during the month. Problem solved.

 

[nutmeg]

I read about this somewhere else. In a nutshell, your mortgage agreement is to make one payment a month, if you send in two or three, you're not following the contract and they'll do what they did.

 

[artfartdart]

Quote from Vinny1:

I currently have a fixed rate mortgage on my house with 24 years left until it is paid off. I won't mention the bank name that I make my payments to, but it is a large publicly traded bank. I usually pay my mortage a few months in advance, and then the bank immediately sends me a bill after I make a payment. For the second time in the last several months, they processed my mortgage payment incorrectly. Instead of applying it as a regular payment with some going to interest and some going to principal, they processed both payments as going to principal only, which means if I didn't call their customer service wondering where my next bill was, I would have been late on both payments, and assessed a late fee. I don't know if they are doing it deliberately to try to get me to pay a late fee, not that I would, or if their processors are just morons. Can I sue if it keeps happening?

It reminds me of a story that I heard in the past when some credit card company would shred their customer's checks and then charge them a late fee for not sending in their payment.

When you send a check to the bank, it is immediately applied to your mortgage.

If you only send one check, it is applied toward principal and interest.

If you send two checks at the same time, the first is applied toward interest and principal, and the second toward principal only.

30 days later, yes, you will have to make another payment. This is what is set out contractually in the note: 360 level (i.e., same amount) payments, due on the same day each month, interest to be calculated over the month, with no penalty toward prepayments.

The reason? The bank is not a custodian of these funds; it receives these funds and passes them directly through to the note holder.

What you want to happen is for the bank to take check one, apply it correctly, and then "hold onto" (i.e., be custodian of) check two until its due date.

They can do this. But you'd need to set up a second account, deposit check two into it, and allow them to automatically draft this account when your mortgage is due.

You sending a second check says to the bank, "apply this to principal only."

Cheers.

 

[Vinny1]

Quote from the1:

Set up electronic withdrawals and make additional payments and it will solve this problem. I do the same thing you do and have my mortgage with a big publicly traded bank. On the 1st of each month my scheduled payment get withdrawn from my checking account, regardless of the additional manual payments I make during the month. Problem solved.

I think I will set up the automatic withdrawals for each month, plus I get to save some money by not having to use stamps. Is there a monthly fee to do that? Have you ever had a problem whereby the bank did not withdraw the money for the month?

 

[nutmeg]

Americna Express did something similiar to me. I have some stuff charged on their extended payment plan in addition to my regular monthly bill.

So my regular bill due was about $200, I had just charged $1000. When I called for my current balance it was 1200 so I mailed them a check for 1200.

They applied the 200 to the current balance due and took the other 1k and applied to my extended due balance. This is not what I wanted them to do, They fixed it for me though.

 

[artfartdart]

Quote from Vinny1:

I think I will set up the automatic withdrawals for each month, plus I get to save some money by not having to use stamps. Is there a monthly fee to do that? Have you ever had a problem whereby the bank did not withdraw the money for the month?

No fee for autopay (in fact, a lot of times you'll get an 1/8% point reduction in your interest rate).

Never had a problem with the bank not being able to withdraw the money. They'll take your $1000 payment even if you only have $500 in the account lol.

 

[N54_Fan]

Most people that send in extra funds want this applied to the principal only since that is what is used to figure your interest amount. The fact that most of the interest is disproportinally paid in the beginning years of the loan is why this maneuver would help you especially. You are in the beginning years of your repayment. If you lower principal (especially in the early years) you will ultimately lessen the rate of payment and TOTAL interest paid on the loan. There is NO REASON to pay interest in advance. The faster you pay principal the less interest you pay.

Here is a website where you can see the effects of extra prinicipal payments on your total interest and how it lessens the time for loan payoff.

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

 

[the1]

There is no fee. Yes, there have been a few times when the bank was slow to withdraw the money. I think there is a 15 day grace period where no penalty is assessed and I've never gotten that close. If they're late it's by a few days at the most. I just keep an eye on it.

Quote from Vinny1:

I think I will set up the automatic withdrawals for each month, plus I get to save some money by not having to use stamps. Is there a monthly fee to do that? Have you ever had a problem whereby the bank did not withdraw the money for the month?

 

[trendlover]

Quote from N54_Fan:

Most people that send in extra funds want this applied to the principal only since that is what is used to figure your interest amount. The fact that most of the interest is disproportinally paid in the beginning years of the loan is why this maneuver would help you especially. You are in the beginning years of your repayment. If you lower principal (especially in the early years) you will ultimately lessen the rate of payment and TOTAL interest paid on the loan. There is NO REASON to pay interest in advance. The faster you pay principal the less interest you pay.

Here is a website where you can see the effects of extra prinicipal payments on your total interest and how it lessens the time for loan payoff.

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

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I think this is good advice for poster Vinny1 maybe only (IF) Vinny1 start to pay extra on (principal) when he first have this morgage. Vinny1 say he have 24 years more to pay on the fixed rate loan. But what is the loan time? Is 30 year?
If is 30 year and Vinny make 6 years of payments (but not extra to the principal), then Vinny1 is already paid much interest to the bank. Because interest is most high on the front end of the loan.
So I think Vinny1 have to look to his amortization schedule.
He will see what he pay for already to the principal/ interest/taxes/insurance in 6 years (I assume he have 30 year morgage)