Can a (mortgage) lender do this? [prepayment question]

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ut2sua
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Can a (mortgage) lender do this? [prepayment question]

Post by ut2sua » Fri Jul 31, 2020 1:47 am

So, I refinanced. Got a good rate and all was good. My mortgage was transferred to another lender (Mr. Cooper), and I noticed that there was a note regarding prepayment policy that effectively stated the equivalence of this: partial payment will be accepted, but the lender will place those in a side account and that could be used to pay for future payments. So I understand this as: it won't be possible for me to make extra payments (prepay part of my mortgage); Actually, I can make extra payments, but those extra payments won't cut down the loan principal, then the extra payments are useless. I have always been able to make extra payments for all my previous mortgages, so this was new to me. Does anyone notice this? My loan does have the "no prepayment penalty" feature. But it seems the lender demands full payment or else, the extra payments won't be counted toward principal reduction. Thanks for all input

RXfiles
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Re: Can a (mortgage) lender do this?

Post by RXfiles » Fri Jul 31, 2020 1:53 am

Call them

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BrandonBogle
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Re: Can a (mortgage) lender do this?

Post by BrandonBogle » Fri Jul 31, 2020 2:06 am

This isn’t what you think it is. Consider those biweekly payment plans some people do, sending half of their monthly mortgage payment in every two weeks. What this says is the partial payment (first “half” payment of the month) is kept as unapplied funds until there is a enough to make a full payment (two weeks later). You can still make additional principal payments at any time (assuming you are current/not delinquent).

grok87
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Re: Can a (mortgage) lender do this?

Post by grok87 » Fri Jul 31, 2020 5:02 am

ut2sua wrote:
Fri Jul 31, 2020 1:47 am
So, I refinanced. Got a good rate and all was good. My mortgage was transferred to another lender (Mr. Cooper), and I noticed that there was a note regarding prepayment policy that effectively stated the equivalence of this: partial payment will be accepted, but the lender will place those in a side account and that could be used to pay for future payments. So I understand this as: it won't be possible for me to make extra payments (prepay part of my mortgage); Actually, I can make extra payments, but those extra payments won't cut down the loan principal, then the extra payments are useless. I have always been able to make extra payments for all my previous mortgages, so this was new to me. Does anyone notice this? My loan does have the "no prepayment penalty" feature. But it seems the lender demands full payment or else, the extra payments won't be counted toward principal reduction. Thanks for all input
i ran into this once years ago when i was considering a refinance. they told me i could not prepay during course of loan but i could pay it off at any time. sounds similar to your situation. i didn't go with that lender.
RIP Mr. Bogle.

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nps
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Re: Can a (mortgage) lender do this?

Post by nps » Fri Jul 31, 2020 5:55 am

A prepayment of prinicpal is not a partial payment, though it may be treated as one if you make it before your regular payment if your regular payment is already due.

Many servicers allow you to select "principal only" or "additional principal" through their online payment options.

MrJedi
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Re: Can a (mortgage) lender do this?

Post by MrJedi » Fri Jul 31, 2020 6:07 am

You have to specify that extra payments are applied to principal and not a future installment.

Golf maniac
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Re: Can a (mortgage) lender do this?

Post by Golf maniac » Fri Jul 31, 2020 2:19 pm

nps wrote:
Fri Jul 31, 2020 5:55 am
A prepayment of prinicpal is not a partial payment, though it may be treated as one if you make it before your regular payment if your regular payment is already due.

Many servicers allow you to select "principal only" or "additional principal" through their online payment options.
+1. Agree, mortgage companies do not accept partial payments. They set them aside until they have the full payment. This has no impact on making additional principal payments. Just make sure you note it is for principal only.

wilshuer
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Re: Can a (mortgage) lender do this?

Post by wilshuer » Fri Jul 31, 2020 2:26 pm

My mortgage is currently serviced by Mr Cooper. Refinancing right now so don't know where I end up.

You are able to apply payment to principal, but they also have the 'partial-payment'. As other's noted, they just don't apply the payment until your partial payments total the monthly payment - i.e. it doesn't reduce your principal by making partial payments.

I have autopay set up for the full payment, with an additional amount toward the principal. If I'm interpreting your question correctly, you are concerned you won't be able to do this - don't worry, you are able to.

barnaclebob
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Re: Can a (mortgage) lender do this?

Post by barnaclebob » Fri Jul 31, 2020 2:38 pm

Mr. Cooper had great customer service when my loan was being serviced by them so call for clarification. But I think you are confusing partial payment of a monthly payment and prepayment of additional principle. If I remember right, when you go to make a one time payment you can select for the next month, put it into escrow, or additional principle.

zimmer0
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Re: Can a (mortgage) lender do this?

Post by zimmer0 » Fri Jul 31, 2020 3:22 pm

barnaclebob wrote:
Fri Jul 31, 2020 2:38 pm
Mr. Cooper had great customer service when my loan was being serviced by them so call for clarification. But I think you are confusing partial payment of a monthly payment and prepayment of additional principle. If I remember right, when you go to make a one time payment you can select for the next month, put it into escrow, or additional principle.
wilshuer wrote:
Fri Jul 31, 2020 2:26 pm
My mortgage is currently serviced by Mr Cooper. Refinancing right now so don't know where I end up.

You are able to apply payment to principal, but they also have the 'partial-payment'. As other's noted, they just don't apply the payment until your partial payments total the monthly payment - i.e. it doesn't reduce your principal by making partial payments.

I have autopay set up for the full payment, with an additional amount toward the principal. If I'm interpreting your question correctly, you are concerned you won't be able to do this - don't worry, you are able to.
same. No complaints on my end. The app is quite user friendly.

Topic Author
ut2sua
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Re: Can a (mortgage) lender do this?

Post by ut2sua » Fri Jul 31, 2020 4:01 pm

Thanks to everyone for your valuable input. You gave me some hope that I misread the prepayment policy language, and I actually can make extra payments to reduce principal after all. I will call and verify things with Mr. Cooper. My service transfer is to be effective starting August, so I was trying to learn from everyone here what to expect before calling the lender. I will post an update once I learn more from them.

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