Trying to pay down mortgage, but...

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Topic Author
tenkuky
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Trying to pay down mortgage, but...

Post by tenkuky » Mon Jan 22, 2018 9:23 pm

So I've weighed the pros and cons of investing vs. paying down mortgage and am committed to doing the latter. I have the ability to intermittently (depending on cash flow) put "principal only" payments above and beyond the monthly payment. I'm throwing odd sums at it at a time, sometimes more than once a month.

However, I'm getting frustrated with the process with my mortgage servicer.
Options:
A. Call and make payments with rep on phone and pay a $4.95 fee each time.
B. Set up automatic plan monthly with set amount of additional principal (free, but only once a month and can't do principal only)
C. Use my bank's Billpay to add principal as needed on my schedule (free)

I opted for C, but this is my problem. It doesn't matter that I call the mortgager servicer in advance and even write "principal ONLY" on the memo line. They always assign it to monthly payment (P+I) and defer my next payment for a month.
It takes a 10 min phone call or chat to correct this, takes 3-5 business days to do so. I've done this 3 times in last 2 months, and when I argue it shouldn't be that difficult, their only response is "do A or B".

Question for my BH family...
Is there a better/easier way, or am I just resigned to taking the time to do this?
Is this usual?

Thanks!

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fortfun
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Re: Trying to pay down mortgage, but...

Post by fortfun » Mon Jan 22, 2018 9:27 pm

Who's the mortgage company? If you can't get it resolved, I'd see if Ally mortgage or Provident Funding can match or beat your current terms (with no closing costs). You might be surprised. If you are using a brick and mortar, they may be able to beat your interest rate and not charge closing costs. They won't give you the hassle that you are getting through the current provider.

magicrat
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Re: Trying to pay down mortgage, but...

Post by magicrat » Mon Jan 22, 2018 9:38 pm

tenkuky wrote:
Mon Jan 22, 2018 9:23 pm

Question for my BH family...
Is there a better/easier way, or am I just resigned to taking the time to do this?
Is this usual?

Thanks!
Yes, there is an easier way. Option B.

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obafgkm
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Re: Trying to pay down mortgage, but...

Post by obafgkm » Mon Jan 22, 2018 9:39 pm

I'm surprised that the original poster's (OP) mortgage company doesn't offer an option D -- write a check directly to the company. In the mortgages I've had over the years, writing a check to the mortgage company myself was always an option, and allowed me to pay extra toward the principal if I wanted.

(Even though now I just pay online at the company's website.)

delamer
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Re: Trying to pay down mortgage, but...

Post by delamer » Mon Jan 22, 2018 9:40 pm

There seems to be lots of variation in what different servicers can handle.

My former HELOC servicer let me make principal payments online at anytime by just checking a box that said “principal payment” and transferring the money from my checking account.

My current HELOC servicer makes me send a secure message to customer service telling it that I want the transferred money to be applied to my principal, not my monthly payment. My suspicion is that the new one wants to discourage principal payments during the draw period.

In your position, I’d just stick with B and add principal to your regular payment.

Topic Author
tenkuky
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Re: Trying to pay down mortgage, but...

Post by tenkuky » Mon Jan 22, 2018 9:42 pm

Thanks for the responses.
Yes, check was an option, but I was trying to use Billpay as a free/faster way to send, learning the hard way the limitations.
Yes, I could probably do B, and stop these mini-pay downs that demonstrate no discipline and are almost like "market timing". I could certainly just set and forget for the equivalent of what I'm trying to do.

I knew you would knock sense into me :D

Interesting on the Ally and Provident, I'll look into it. Thanks!
Last edited by tenkuky on Mon Jan 22, 2018 9:48 pm, edited 1 time in total.

magicrat
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Re: Trying to pay down mortgage, but...

Post by magicrat » Mon Jan 22, 2018 9:44 pm

You can also do Option B and just change back to $0 additional principle for the next month

Doctor Rhythm
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Re: Trying to pay down mortgage, but...

Post by Doctor Rhythm » Mon Jan 22, 2018 10:13 pm

One potential benefit of making an additional, fixed monthly payment on the principal (rather than ad hoc extra payments) is that it enforces the discipline to save. Just make sure the payment amount is something you can live with.

cusetownusa
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Re: Trying to pay down mortgage, but...

Post by cusetownusa » Tue Jan 23, 2018 8:20 am

Not sure who your mortgage provider is but ithe way I do this is simply log into my account. Then select payment (or something similar) and just enter the amount and select principal only.

As with you I don’t have a set amount that I put towards principal every month so I couldn’t do the automatic payments. Depending on cash flow, etc, some months I will throw $10,000 at it and some months nothing.

TOJ
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Re: Trying to pay down mortgage, but...

Post by TOJ » Tue Jan 23, 2018 9:54 am

Just take a monthly average of your total principal-only payments so far and then opt for B with that number. Had to do this same thing, myself. The single large chunks randomly throughout the year are more satisfying, I agree.

stickstickly
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Re: Trying to pay down mortgage, but...

Post by stickstickly » Tue Jan 23, 2018 1:15 pm

My loan got sold to a new servicer with similar restrictions to yours on payments, and I ended up refinancing my loan to get away from them. I have had many servicers over the years, and they were the only ones who ever had those silly restrictions. My current servicer is great, I can log in and make principal only payments any time I want for free.

Topic Author
tenkuky
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Re: Trying to pay down mortgage, but...

Post by tenkuky » Tue Jan 23, 2018 1:25 pm

I looked around recent rates and I would refi if I could, but rates are higher since I locked and with closing costs, not worth it to a BH like me.
The satisfaction from the intermittent bulk paydowns is the drop in interest on the statement that I see :beer
But I'll do option B just to avoid being annoyed and calculate it out for the rest of the year.
Thanks, all!

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unclescrooge
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Re: Trying to pay down mortgage, but...

Post by unclescrooge » Tue Jan 23, 2018 1:42 pm

This is the universe telling you not to pay down your mortgage. :mrgreen:

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deanbrew
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Re: Trying to pay down mortgage, but...

Post by deanbrew » Tue Jan 23, 2018 2:45 pm

unclescrooge wrote:
Tue Jan 23, 2018 1:42 pm
This is the universe telling you not to pay down your mortgage. :mrgreen:
Haha, that's exactly what I was thinking. I could possibly see doing Option B, as it's simple and automatic. There's no way I would try and make multiple extra payments each month, knowing I would have to track them somehow. Why complicate your life?

Having said that, I don't make extra principle payments on my mortgage, so I don't worry about how to do it. I'd rather keep my money liquid and invested.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

runner3081
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Re: Trying to pay down mortgage, but...

Post by runner3081 » Tue Jan 23, 2018 2:51 pm

We are doing the same thing, random amounts each month ($X in bank account less $ Set Desired amount).

I did run into a problem with Colonial savings. Even when I use their site and use the "Principal" payment button, if my extra payment is made BEFORE my automatic monthly payment hits the account, it screws it all up.

Now, I just wait 2 days after the monthly payment posts and then make the extra payment. No issues now.

MindBogler
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Re: Trying to pay down mortgage, but...

Post by MindBogler » Tue Jan 23, 2018 2:56 pm

So many banks make it difficult to do this for auto loans, home loans, you name it. I can't help but think it is intentional. :x

Topic Author
tenkuky
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Re: Trying to pay down mortgage, but...

Post by tenkuky » Tue Jan 23, 2018 4:53 pm

I will do the "after monthly payment" thing, I think you are right, before the payment, it screws it up.
I finally got the 1/16 payment reversed on 1/23, 1 week to do!
As for the universe, nobody knows nuttin'! :twisted:
It's either Ally @ 1.35% or paying down a 3.375% 15 year fixed.
Got the EF and pretax retirement on track.

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CAsage
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Re: Trying to pay down mortgage, but...

Post by CAsage » Tue Jan 23, 2018 5:06 pm

tenkuky wrote:
Mon Jan 22, 2018 9:23 pm
.
B. Set up automatic plan monthly with set amount of additional principal (free, but only once a month and can't do principal only)
Doing this more than once a month is possibly ... excessive. You don't get much benefit with a few days here and there off the principal. If you set up an automatic payment, can you plan a certain minimum amount, and is it editable? I pay all my bills pretty much once a month, and the big loans (that gorgeous kitchen...) get a variable amount of whatever I can above the minimum.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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rob
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Re: Trying to pay down mortgage, but...

Post by rob » Tue Jan 23, 2018 5:17 pm

MindBogler wrote:
Tue Jan 23, 2018 2:56 pm
So many banks make it difficult to do this for auto loans, home loans, you name it. I can't help but think it is intentional. :x
Oh it is for sure.... To pay the full amount on some of my credit cards I had to call to have them snail mail me a form that I had to sign and snail mail back and wait for a couple of cycles for it to take affect..... If you want to pay $x each cycle you could do it on the web-site :D
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

mouses
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Re: Trying to pay down mortgage, but...

Post by mouses » Tue Jan 23, 2018 5:24 pm

I also don't know why you're doing this more than once a month. It sounds to me like you can set up the automatic thing and then modify it each month to do what you want that month. Not as good as a reasonable website but adequate.

mouses
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Re: Trying to pay down mortgage, but...

Post by mouses » Tue Jan 23, 2018 5:26 pm

rob wrote:
Tue Jan 23, 2018 5:17 pm
MindBogler wrote:
Tue Jan 23, 2018 2:56 pm
So many banks make it difficult to do this for auto loans, home loans, you name it. I can't help but think it is intentional. :x
Oh it is for sure.... To pay the full amount on some of my credit cards I had to call to have them snail mail me a form that I had to sign and snail mail back and wait for a couple of cycles for it to take affect..... If you want to pay $x each cycle you could do it on the web-site :D
That's crazy. You should dump them.

cherijoh
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Re: Trying to pay down mortgage, but...

Post by cherijoh » Tue Jan 23, 2018 5:27 pm

tenkuky wrote:
Mon Jan 22, 2018 9:23 pm
So I've weighed the pros and cons of investing vs. paying down mortgage and am committed to doing the latter. I have the ability to intermittently (depending on cash flow) put "principal only" payments above and beyond the monthly payment. I'm throwing odd sums at it at a time, sometimes more than once a month.

However, I'm getting frustrated with the process with my mortgage servicer.
Options:
A. Call and make payments with rep on phone and pay a $4.95 fee each time.
B. Set up automatic plan monthly with set amount of additional principal (free, but only once a month and can't do principal only)
C. Use my bank's Billpay to add principal as needed on my schedule (free)

I opted for C, but this is my problem. It doesn't matter that I call the mortgager servicer in advance and even write "principal ONLY" on the memo line. They always assign it to monthly payment (P+I) and defer my next payment for a month.
It takes a 10 min phone call or chat to correct this, takes 3-5 business days to do so. I've done this 3 times in last 2 months, and when I argue it shouldn't be that difficult, their only response is "do A or B".

Question for my BH family...
Is there a better/easier way, or am I just resigned to taking the time to do this?
Is this usual?

Thanks!
So for option B are you saying that you can add extra principle to your regular payment but you can't do a separate second payment? That still makes the most sense to me. Mortgages are an odd animal vs. say a credit card because they are NOT set up to easily take extra payments and you are making it worse by paying willy-nilly. This increases the likelihood for an error.

IMO, you aren't getting any substantive benefit by making it more complicated than it needs to be. What is your reasoning for multiple extra principal payments? Don't you trust yourself not to spend the money? Or is it that you think you are saving a lot of interest by doing it that way vs. aggregating the odd sums and paying them along with your regular payment (option B)? If your logic is the latter, I think you are overestimating your savings!

Let's say you could pay an extra $100 twice a month towards principal. (I know it isn't an odd amount but it makes the math easy to follow). If you prepay $100 of principal mid-month vs. prepaying it at the end of the month and your interest rate is 4%/year then you are only saving ~$0.17 each month ($100 * .04/24) by making 2 extra principal payments vs. just one for $200 at the end of the month. Feel free to substitute your own numbers, but I would ask yourself if your current method is worth the hassle.

Chadnudj
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Re: Trying to pay down mortgage, but...

Post by Chadnudj » Tue Jan 23, 2018 5:31 pm

Isn't there option D:

D. Stop automatic bill pay via your mortgage servicer, instead do bill pay via your checking account each month and contribute whatever you want.

Even if D would only advance your due date by your mortgage servicer's accounting, if you keep making the monthly payment (plus any extra you want toward principal) via your checking account bill pay process, there is no difference mathematically as you go towards paying it off (unless I'm missing something). You'll just advance the next due date until eventually there is nothing left to advance, at which point you're done.

This is what I'm doing with one of my student loans -- I pay about $75 extra each month automatically, and more when I have some extra. It advances my due date (technically I think I'm paid up through October or November of this year right now), but also reduces principal and will eventually pay off the student loan if I keep it up long enough.

cherijoh
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Re: Trying to pay down mortgage, but...

Post by cherijoh » Tue Jan 23, 2018 5:39 pm

rob wrote:
Tue Jan 23, 2018 5:17 pm
MindBogler wrote:
Tue Jan 23, 2018 2:56 pm
So many banks make it difficult to do this for auto loans, home loans, you name it. I can't help but think it is intentional. :x
Oh it is for sure.... To pay the full amount on some of my credit cards I had to call to have them snail mail me a form that I had to sign and snail mail back and wait for a couple of cycles for it to take affect..... If you want to pay $x each cycle you could do it on the web-site :D
My guess this is CYA for your credit card company. What happens if you get one huge bill and you have set it to be payable in full. You could wipe out your entire checking account balance and then start get over draft and insufficient funds fees right and left. Then you go back to the credit card company and scream bloody murder and ask them to cover all the fees. They want to have a form on file that explains all the potential consequences of setting it up that way and which has your signature on it. I'll bet this requirement is based on their real experience. If you want to pay a credit off in full each month, pushing an ACH is much safer than pulling one!

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willthrill81
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Re: Trying to pay down mortgage, but...

Post by willthrill81 » Tue Jan 23, 2018 6:29 pm

Since we want to make varying extra principal payments on our mortgage as well, we have to write out a physical check and mail it in. It's a pain, but it only costs a stamp a month and takes two minutes.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Topic Author
tenkuky
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Re: Trying to pay down mortgage, but...

Post by tenkuky » Tue Jan 23, 2018 10:28 pm

cherijoh wrote:
Tue Jan 23, 2018 5:27 pm
tenkuky wrote:
Mon Jan 22, 2018 9:23 pm
So I've weighed the pros and cons of investing vs. paying down mortgage and am committed to doing the latter. I have the ability to intermittently (depending on cash flow) put "principal only" payments above and beyond the monthly payment. I'm throwing odd sums at it at a time, sometimes more than once a month.

However, I'm getting frustrated with the process with my mortgage servicer.
Options:
A. Call and make payments with rep on phone and pay a $4.95 fee each time.
B. Set up automatic plan monthly with set amount of additional principal (free, but only once a month and can't do principal only)
C. Use my bank's Billpay to add principal as needed on my schedule (free)

I opted for C, but this is my problem. It doesn't matter that I call the mortgager servicer in advance and even write "principal ONLY" on the memo line. They always assign it to monthly payment (P+I) and defer my next payment for a month.
It takes a 10 min phone call or chat to correct this, takes 3-5 business days to do so. I've done this 3 times in last 2 months, and when I argue it shouldn't be that difficult, their only response is "do A or B".

Question for my BH family...
Is there a better/easier way, or am I just resigned to taking the time to do this?
Is this usual?

Thanks!
So for option B are you saying that you can add extra principle to your regular payment but you can't do a separate second payment? That still makes the most sense to me. Mortgages are an odd animal vs. say a credit card because they are NOT set up to easily take extra payments and you are making it worse by paying willy-nilly. This increases the likelihood for an error.

IMO, you aren't getting any substantive benefit by making it more complicated than it needs to be. What is your reasoning for multiple extra principal payments? Don't you trust yourself not to spend the money? Or is it that you think you are saving a lot of interest by doing it that way vs. aggregating the odd sums and paying them along with your regular payment (option B)? If your logic is the latter, I think you are overestimating your savings!

Let's say you could pay an extra $100 twice a month towards principal. (I know it isn't an odd amount but it makes the math easy to follow). If you prepay $100 of principal mid-month vs. prepaying it at the end of the month and your interest rate is 4%/year then you are only saving ~$0.17 each month ($100 * .04/24) by making 2 extra principal payments vs. just one for $200 at the end of the month. Feel free to substitute your own numbers, but I would ask yourself if your current method is worth the hassle.
That seals it for me, the hassle is not worth it. Will do Option B. I thought I was being clever about saving interest but this is nuts :oops:

cherijoh
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Re: Trying to pay down mortgage, but...

Post by cherijoh » Wed Jan 24, 2018 6:57 am

tenkuky wrote:
Tue Jan 23, 2018 10:28 pm
cherijoh wrote:
Tue Jan 23, 2018 5:27 pm
tenkuky wrote:
Mon Jan 22, 2018 9:23 pm
So I've weighed the pros and cons of investing vs. paying down mortgage and am committed to doing the latter. I have the ability to intermittently (depending on cash flow) put "principal only" payments above and beyond the monthly payment. I'm throwing odd sums at it at a time, sometimes more than once a month.

However, I'm getting frustrated with the process with my mortgage servicer.
Options:
A. Call and make payments with rep on phone and pay a $4.95 fee each time.
B. Set up automatic plan monthly with set amount of additional principal (free, but only once a month and can't do principal only)
C. Use my bank's Billpay to add principal as needed on my schedule (free)

I opted for C, but this is my problem. It doesn't matter that I call the mortgager servicer in advance and even write "principal ONLY" on the memo line. They always assign it to monthly payment (P+I) and defer my next payment for a month.
It takes a 10 min phone call or chat to correct this, takes 3-5 business days to do so. I've done this 3 times in last 2 months, and when I argue it shouldn't be that difficult, their only response is "do A or B".

Question for my BH family...
Is there a better/easier way, or am I just resigned to taking the time to do this?
Is this usual?

Thanks!
So for option B are you saying that you can add extra principle to your regular payment but you can't do a separate second payment? That still makes the most sense to me. Mortgages are an odd animal vs. say a credit card because they are NOT set up to easily take extra payments and you are making it worse by paying willy-nilly. This increases the likelihood for an error.

IMO, you aren't getting any substantive benefit by making it more complicated than it needs to be. What is your reasoning for multiple extra principal payments? Don't you trust yourself not to spend the money? Or is it that you think you are saving a lot of interest by doing it that way vs. aggregating the odd sums and paying them along with your regular payment (option B)? If your logic is the latter, I think you are overestimating your savings!

Let's say you could pay an extra $100 twice a month towards principal. (I know it isn't an odd amount but it makes the math easy to follow). If you prepay $100 of principal mid-month vs. prepaying it at the end of the month and your interest rate is 4%/year then you are only saving ~$0.17 each month ($100 * .04/24) by making 2 extra principal payments vs. just one for $200 at the end of the month. Feel free to substitute your own numbers, but I would ask yourself if your current method is worth the hassle.
That seals it for me, the hassle is not worth it. Will do Option B. I thought I was being clever about saving interest but this is nuts :oops:
You are saving considerable interest by making the extra payments vs. not making extra payments. It's the incremental benefit of splitting the extra payment that isn't worth it.

Some mortgage lenders offer a "biweekly" mortgage scheme (and may charge you extra for the privilege :oops: ). People may think they are saving money because they are paying the money back quicker (i.e., basically what you were thinking), but the real benefit comes from making 13 payments per year vs. 12.

Pigeye Brewster
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Re: Trying to pay down mortgage, but...

Post by Pigeye Brewster » Wed Jan 24, 2018 9:53 am

tenkuky wrote:
Tue Jan 23, 2018 10:28 pm
That seals it for me, the hassle is not worth it. Will do Option B. I thought I was being clever about saving interest but this is nuts :oops:
Even Option B is not foolproof. I've been in the habit of adding on a round dollar amount of additional principal to every payment for several years. A couple of months ago I increased the amount substantially, to the point where it exceeded the scheduled PITI. Fortunately I checked my account online because the mortgage company applied it first to the next month's payment and only the amount in excess of that to principal. I emailed them and told them it was all additional principal and they corrected it after a few days.

KATNYC
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Re: Trying to pay down mortgage, but...

Post by KATNYC » Wed Jan 24, 2018 10:08 am

Is there an option E: use the payment coupon and write in additional principal?
Our mortgage payment coupon has 2 options: additional principal & additional escrow.
We pay online so never use the coupons.

LiterallyIronic
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Re: Trying to pay down mortgage, but...

Post by LiterallyIronic » Wed Jan 24, 2018 10:14 am

Is there no Option D: Drive over to the bank and make a payment to principal only? That's what I do.

ryman554
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Re: Trying to pay down mortgage, but...

Post by ryman554 » Wed Jan 24, 2018 10:15 am

Chadnudj wrote:
Tue Jan 23, 2018 5:31 pm
Isn't there option D:

D. Stop automatic bill pay via your mortgage servicer, instead do bill pay via your checking account each month and contribute whatever you want.

Even if D would only advance your due date by your mortgage servicer's accounting, if you keep making the monthly payment (plus any extra you want toward principal) via your checking account bill pay process, there is no difference mathematically as you go towards paying it off (unless I'm missing something). You'll just advance the next due date until eventually there is nothing left to advance, at which point you're done.

This is what I'm doing with one of my student loans -- I pay about $75 extra each month automatically, and more when I have some extra. It advances my due date (technically I think I'm paid up through October or November of this year right now), but also reduces principal and will eventually pay off the student loan if I keep it up long enough.
You need to be very careful about this.

If all you are doing is "prepaying next months payment" you aren't actually getting any benefit from this at all. You would still need to pay 360 payments to pay off your mortgage. (or, in your case, student loans)

You do want to be prepaying principal to get the interest reduction benefit. The OP wants to pay less interest overall to the bank, not just get the payments done faster. You'll pay less money to the loan in this way.

Are you sure you are getting extra principal reduction, beyond what the amortization table tells you? Because, if not, you are paying too much interest on your loans.

The Wizard
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Re: Trying to pay down mortgage, but...

Post by The Wizard » Wed Jan 24, 2018 10:22 am

stickstickly wrote:
Tue Jan 23, 2018 1:15 pm
My loan got sold to a new servicer with similar restrictions to yours on payments, and I ended up refinancing my loan to get away from them. I have had many servicers over the years, and they were the only ones who ever had those silly restrictions. My current servicer is great, I can log in and make principal only payments any time I want for free.
Ok, but interest actually accrues daily.
So if I make an additional payment a week after my regular payment, then the interest for those seven days gets paid first, then the rest goes to principal.
This also reduces the interest paid in your next regular monthly payment since interest has only been accruing for three weeks or so this cycle.

That's how it works for me anyway...
Attempted new signature...

Greg G2
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Re: Trying to pay down mortgage, but...

Post by Greg G2 » Wed Jan 24, 2018 10:28 am

Over the last 30 month I aggressively paid my house off. The mortgage was sold during that time, both companies had a place on their website to make additional payments and specifically specify principle amounts. I did link to my bank account to make it easy. I set up separate account for those funds. Sometimes this feature has been hard to find and they moved occasionally or changed the look and feel, but both had it.

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