Extra payment to prinicipal or interest>?

[PeterA007]

We have been making extra payments each month on a mortgage. Our bank has been applying it to interest and zero to reducing principal. I know some banks require you to tell them to apply extra payments to principal. However others (like Wells Fargo) do not and apply it automatically to reduce principal. You dont have to tell them. Our bank does not address it at all in loan documents or their online payment system. But instead they say it is all applied to interest and our next regular monthly payment isnt due until Oct 2025. Another bank where I have a loan has an online option checkbox to pay and it insists to declare regular payment or extra principal payment before you submit. But the bank in question does not.



Ridiculos. So I am going to fight it. I want those payments applied to principal of course. Any suggestions appreciated.

[CoAndy]

Are you sure there isn't a away to select "extra principal" when you're making a payment? Every mortgage lender I have had has the option. Do you pay via their website?

[rockstar]

Are you sure there isn't a away to select "extra principal" when you're making a payment? Every mortgage lender I have had has the option. Do you pay via their website?

Sounds like they’re paying ahead.

I have two options for mine: extra principal or extra escrow.

Let me edit this. It could only be going to interest if they’re really delinquent. But they’d really need a high rate for this to happen.

[Hyperchicken]

Your payments were not applied to "interest", they were applied to future payments.

You can only pay interest that you accrued. But lenders/servicers would allow you making future payments ahead of time.

Sounds like your lender/servicer has atrociously poor interface for making payments, if they are not making it clear where your payment goes.

In my experience with Bank of America, they make it very clear, so that there is zero ambiguity as to where your payment is applied.

[PeterA007]

Are you sure there isn't a away to select "extra principal" when you're making a payment? Every mortgage lender I have had has the option. Do you pay via their website?

I an very sure. Their onlne payment system has a box to make a 'note' but nowhere does it give an option for payment intention, nor does it say anywhere to include a note to do so.

[toddthebod]

Your payments were not applied to "interest", they were applied to future payments.

You can only pay interest that you accrued. But lenders/servicers would allow you making future payments ahead of time.

Sounds like your lender/servicer has atrociously poor interface for making payments, if they are not making it clear where your payment goes.

In my experience with Bank of America, they make it very clear, so that there is zero ambiguity as to where your payment is applied.

I agree with this. My mortgage documents in fact are abundantly clear that additional payments will be applied towards future payments.

Are you sure there isn't a away to select "extra principal" when you're making a payment? Every mortgage lender I have had has the option. Do you pay via their website?

I an very sure. Their onlne payment system has a box to make a 'note' but nowhere does it give an option for payment intention, nor does it say anywhere to include a note to do so.

I would not expect their monthly payment interface to be the same interface you would want to use to make a payment to principal. You should call the servicer and ask them if they have a separate form or way for you to send in a payment for principal.

[PeterA007]

Your payments were not applied to "interest", they were applied to future payments.

You can only pay interest that you accrued. But lenders/servicers would allow you making future payments ahead of time.

Sounds like your lender/servicer has atrociously poor interface for making payments, if they are not making it clear where your payment goes.

In my experience with Bank of America, they make it very clear, so that there is zero ambiguity as to where your payment is applied.

This may be my problem. This was set up as a recurring ACH payment from an outside bank. So havent paid attention,
They do have an option for 'Regular Payment' OR 'Paydown to $0'
But what does paydown to zero mean? That sounds like an option to pay off the entire loan

[Hyperchicken]

...
They do have an option for 'Regular Payment' OR 'Paydown to $0'
...

Does the 'Regular Payment' option have a separate field for extra principal payment?

[mhalley]

I would start with a written letter sent via certified mail. This is a “qualified written request”. This requires a response within 5 days.Include proof that you have made the extra payments and you want them placed towards the principal.
https://consumer.ftc.gov/articles/your- ... r-mortgage
If that doesn’t work, file a complaint to the CFPB here
https://www.consumerfinance.gov/complaint/

[PeterA007]

...
They do have an option for 'Regular Payment' OR 'Paydown to $0'
...

Does the 'Regular Payment' option have a separate field for extra principal payment?

NO. There is only 'Regular Payment' and 'Paydown to $0' options. Nowhere does it mention in anyway anywhere there is an option to pay down principal. And 'Regular Payment' is the default option. It isnt abundant.y clear there is another option unless you click on it. And I clearly didn't want to 'Pay down to zero'

[PeterA007]

The loan agreement states:
I can prepay in whole or in part at any time with no penalty.
and
'Payments and other credits will be applied first to any charges you owe other tahn principal and interest, then to interest that is due,
and finally to principal that is due'.

My next payment is due in October 2025. Payments required between now and then are not 'due'.

Its a smaller regional savings bank. 7 branches and 10 ATMs

Why would anyone want to prepay monthly payments 13 months in advance rather than pay down principal

[InvisibleAerobar]

Sorry to hear of this, as I went through pretty much the same issue myself (payment earmarked for principal got applied to next month's payment). I wrote about my complaint against my (incompetent) loan servicer here.

Your loan servicer may differ from mine (and I hope it's more competent than mine), but I won't expect much.

As someone who's very familiar with the concept of making a bona fide request, even if it ultimately gets denied at first, I think the belt-and-suspender approach is a written communication that sets forth a deadline for when the issue should be resolved (say 7 business days), a wait of 7 business days for a constructive response, and followed immediately by a compliant to the CFPB if your issue isn't addressed in 7 business days.

I prefer to do the song-and-dance of the initial written request, b/c then it demonstrates to CFPB that you've exhausted other avenues and that the matter is ripe for CFPB to look into. Once CFPB forwards your inquiry, the financial institution usually gets its act together tout de suite, b/c CFPB directs its letters to a big shot at the financial institution. In my case, what seemed intractable (and was deemed "still pending" by my current servicer even after the issue was resolved) was resolved in 48 hours after CFPB reached out to the VP of loans at the loan originator. The VP of loans placed a few calls, and the amount that was initially applied as early payment was corrected to be extra principal payment.

[PeterA007]

Sorry to hear of this, as I went through pretty much the same issue myself (payment earmarked for principal got applied to next month's payment). I wrote about my complaint against my (incompetent) loan servicer here.

Your loan servicer may differ from mine (and I hope it's more competent than mine), but I won't expect much.

As someone who's very familiar with the concept of making a bona fide request, even if it ultimately gets denied at first, I think the belt-and-suspender approach is a written communication that sets forth a deadline for when the issue should be resolved (say 7 business days), a wait of 7 business days for a constructive response, and followed immediately by a compliant to the CFPB if your issue isn't addressed in 7 business days.

I prefer to do the song-and-dance of the initial written request, b/c then it demonstrates to CFPB that you've exhausted other avenues and that the matter is ripe for CFPB to look into. Once CFPB forwards your inquiry, the financial institution usually gets its act together tout de suite, b/c CFPB directs its letters to a big shot at the financial institution. In my case, what seemed intractable (and was deemed "still pending" by my current servicer even after the issue was resolved) was resolved in 48 hours after CFPB reached out to the VP of loans at the loan originator. The VP of loans placed a few calls, and the amount that was initially applied as early payment was corrected to be extra principal payment.

I sent an email today with all pertinent facts and attachements (including screen shots of their own payment portal) which was acknowledged by the loan servicer I was speaking with and she replied copying her manager. Formally requested retroactievly applying those 18 extra payments to principal. [Unnecessary comment removed by admin LadyGeek]

[iamlucky13]

My credit union shows a checkbox if I want to manually make a payment that reads, "Apply to principal only." I admit, aside from paying the current amount pending due manually rather than waiting for the auto-payment to complete, I don't understand what other option there could be.

I especially don't understand what it would mean to make a payment to interest only. Interest accrues on the balance each month. If I have paid the interest that accrued for that month, there is no interest left to pay?

For a bank to accept a payment on a loan in excess of the amount due for the month, but not reduce the remaining principle owed sounds outright fraudulent.

I agree with this. My mortgage documents in fact are abundantly clear that additional payments will be applied towards future payments.

Why would anyone pay ahead then? This sounds like an arrangement that exists solely to deliberately lead a customer away from the outcome they desire. Applying an extra payment to principle is the only outcome that makes sense to me, as pre-paying a future bill only reduces the customer's cash available to earn interest, and increases the bank's available cash.

[toddthebod]

My credit union shows a checkbox if I want to manually make a payment that reads, "Apply to principal only." I admit, aside from paying the current amount pending due manually rather than waiting for the auto-payment to complete, I don't understand what other option there could be.

I especially don't understand what it would mean to make a payment to interest only. Interest accrues on the balance each month. If I have paid the interest that accrued for that month, there is no interest left to pay?

For a bank to accept a payment on a loan in excess of the amount due for the month, but not reduce the remaining principle owed sounds outright fraudulent.

I agree with this. My mortgage documents in fact are abundantly clear that additional payments will be applied towards future payments.

Why would anyone pay ahead then? This sounds like an arrangement that exists solely to deliberately lead a customer away from the outcome they desire. Applying an extra payment to principle is the only outcome that makes sense to me, as pre-paying a future bill only reduces the customer's cash available to earn interest, and increases the bank's available cash.

The point is to avoid arguments like this thread when someone sends in a mortgage payment in the middle of the month. If they automatically applied the extra payment to principal, but you wanted it applied to the next month, your payment would be late and you'd get charged interest and penalties, and you'd be upset. They had to pick one or the other, and the vast majority of borrowers are not prepaying principal. I guess they can do something fancy and first apply extra money to next month's payment, then to principal, but not to anything two months away or more, but OP could also call his bank and ask how to apply payments to principal instead of selecting "regular payment" on the payment portal and then getting upset when his payment is treated as a regular payment.

Keep in mind that this is an entirely automated system. There is no human looking at the payment and making a decision based on logic. They just programmed a simple algorithm.

[PeterA007]

, but OP could also call his bank and ask how to apply payments to principal instead of selecting "regular payment" on the payment portal and then getting upset when his payment is treated as a regular payment.

Keep in mind that this is an entirely automated system. There is no human looking at the payment and making a decision based on logic. They just programmed a simple algorithm.
[/quote]

There was only one option that wss partially logical and sensical it was not
'pay down to $0'

I did speak with them and their defense was this was standard banking industry procedure to apply it only to interest. I contend it is not.

[StevieG72]

I always went to my bank and made the extra payment asking that it be applied to principal. The automated payment system does not know your intent and seems to just log it as a payment, pushing your next payment date forward each time.

As a previous poster mentioned, it does not seem your payment was applied to interest.

I would go to the branch in person and explain to them what I was trying to accomplish and ask them to make it right.

It may be that they can take all of those future payments and immediately apply them to principal. However, it may be a stretch for them to retroactively apply them to principal.

Did you not look at your loan following the extra payments to verify they were being applied correctly? Some of the blame falls on you for not performing due diligence.

[toddthebod]

There was only one option that wss partially logical and sensical it was not
'pay down to $0'

"Pay down to $0" is the logical choice of the two if you want to make a payment towards principal, as paying down to $0 is explicitly paying principal. What do you think would happen if you sent them $100 with the option "Pay down to $0"? You think they would send it back?

Out of curiosity, how long have you been making these extra payments to end up a full year ahead?

[MishkaWorries]

Are you sure there isn't a away to select "extra principal" when you're making a payment? Every mortgage lender I have had has the option. Do you pay via their website?

I an very sure. Their onlne payment system has a box to make a 'note' but nowhere does it give an option for payment intention, nor does it say anywhere to include a note to do so.

Did you put a note that you wanted the payment to apply to principal?

[PeterA007]

Did you put a note that you wanted the payment to apply to principal?

Please read the posts

[PeterA007]

There was only one option that wss partially logical and sensical it was not
'pay down to $0'

"Pay down to $0" is the logical choice of the two if you want to make a payment towards principal, as paying down to $0 is explicitly paying principal. What do you think would happen if you sent them $100 with the option "Pay down to $0"? You think they would send it back?

Out of curiosity, how long have you been making these extra payments to end up a full year ahead?

Where do you think a 'regular payment' should go? 1oo percent to interest? Or a normal (ie. 'regular') amortized split with principal?

'Out of curiosity, how long have you been making these extra payments to end up a full year ahead?'
The answer to that seems rather obvious. Does it not?

[jeffyscott]

Our bank has been applying it to interest and zero to reducing principal....But instead they say it is all applied to interest and our next regular monthly payment isnt due until Oct 2025.

'Payments and other credits will be applied first to any charges you owe other tahn principal and interest, then to interest that is due,
and finally to principal that is due'.

My next payment is due in October 2025. Payments required between now and then are not 'due'.

How can the payment be 100% interest? The only "interest due" would be what is due at the time of the payment. Are you sure that the principal is not also reduced with each payment?

Back when we were paying down our mortgage held in house by a small credit union, like your experience, the next payment due date got pushed out later and later, but each payment went to the interest due as of the date of the payment first and then reduced principal.

So let's say you owe $100,000 and interest rate is 6%. You make a payment of $6000 halfway through the month. The interest for 1/2 of a month would 0.5% or $500, so the other $5500 makes your mortgage balance $94,500. (Your next payment is now not due until some later date. (With date determined by the original term of the loan, I guess ...e.g. if there's 10 years left, then whatever date you would need to resume normal payments in order to have it paid off in 10 years . )

I always thought this was a nice way to do it as it gave us the flexibility to forgo any payments for an extended period of time.

Because of my experience, I have never understood the talk around "applying the extra payments to principal", in my mind it always just applied to the loan. Whatever money is paid in is just applied to the loan by paying interest due as of that date and the whatever is left reduces principal.

You seem to be saying that instead of that your loan balance would remain $100,000 and the $6000 would mean that you've paid the next year's interest in advance and your next 12 payments would presumably then be 100% principal. I'd be very surprised if that is the way it actually works.

[Hyperchicken]

How can the payment be 100% interest? The only "interest due" would be what is due at the time of the payment. Are you sure that the principal is not also reduced with each payment?
...

The payment is not 100% interest. It's a regular future payment. Lenders (some/most lenders anyway) allow making future payments ahead of time so that then you won't have another payment for a while. It's a pointless feature IMO but they allow that and some forum members posted they did that for one reason or another, so I guess there is some customer demand for this feature.

Sounds like that's what happened to OP while that was not their intent.

Also sounds like OP's mortgage's lender/servicer has atrocious user interface for making payments.

[Hacksawdave]

I had a similar situation back in 1999 when WAMU took over my mortgage provider. There were no online payment systems back then, and WAMU simply decided to stop applying principal only additional payments.

I take it there is no branch to walk into and ask for a loan officer to address “How can we fix this?” in a cordial way? I took this approach after dissatisfaction talking to their customer ‘service’ people. I received the too bad and pound sand answer.

As I do not know the remaining length, interest rates or terms or your mortgage, is refinancing at a shorter term an option? If you have a low rate and cannot get resolution, then you might be stuck with it for a while.

My situation ended a bit differently. I paid mine off in 1999 during the dotcom frenzy due to a stock split (sold half after the 2-1) and went back to the same WAMU branch that snubbed me before. It was an older fixed mortgage at 5.5% and I saved thousands of dollars by doing so.

[jeffyscott]

How can the payment be 100% interest? The only "interest due" would be what is due at the time of the payment. Are you sure that the principal is not also reduced with each payment?
...

The payment is not 100% interest. It's a regular future payment. Lenders (some/most lenders anyway) allow making future payments ahead of time so that then you won't have another payment for a while. It's a pointless feature IMO but they allow that and some forum members posted they did that for one reason or another, so I guess there is some customer demand for this feature.

Sounds like that's what happened to OP while that was not their intent.

Also sounds like OP's mortgage's lender/servicer has atrocious user interface for making payments.

I still doubt that you can be somehow charged interest in advance on money that you no longer owe.

Of course, if the extra amount is small enough it might all be interest. If I owe $1,000,000 at 6% and pay $1000 on the 15th of the month, then it would all be interest since 1/2 of the month's interest would be $2500. But then if 15 days later I pay another sum it's going to include less interest that it would've had I not paid the $1000 on the 15th.



Using my earlier example, let's assume the normal monthly payment of principal and interest was $1000. So the loan has a balance of $100,000, interest rate of 6%, and monthly payment of $1000 as of Sept. 1 and my next payment is due Oct. 1.

On Sept. 15th, I paid $6000. At worst, I would think they would treat $1000 as the normal Oct. 1 payment with a full month's interest applied, so $500 interest and $500 principal. But the other $5000 certainly can not be treated as if it were paid on Nov. 1, Dec. 1, Jan. 1, etc. with respect to the interest, can it? If so then that is a real failure of financial regulation.

If they say, okay now your next payment is not due until _____, I would assume that if you wait and make a payment on that date, the interest portion will be the interest on a balance of $94,500 ($100K less the $500 for Oct 1 and the extra $5000 that was paid).

[Hyperchicken]

I still doubt that you can be somehow charged interest in advance on money that you no longer owe.
...

Well, that's a fact that lenders do that. You can doubt that, of course.

You are not "charged interest in advance" though. You are making future payments ahead of time. Those payments then get credited as of their due date each. Until their due date they just sit there, out of your pocket but not yet credited towards your mortgage. Then as payments come due, they come out of the limbo and get credited, and it is at that future moment that you are charged accrued interest, as you would be if you made these same payments normally.

[PeterA007]

I guess if I get posted on the ISS for the next 13 months I did the right thing.

[bradpevans]

How can the payment be 100% interest? The only "interest due" would be what is due at the time of the payment. Are you sure that the principal is not also reduced with each payment?
...

The payment is not 100% interest. It's a regular future payment. Lenders (some/most lenders anyway) allow making future payments ahead of time so that then you won't have another payment for a while. It's a pointless feature IMO but they allow that and some forum members posted they did that for one reason or another, so I guess there is some customer demand for this feature.

Sounds like that's what happened to OP while that was not their intent.

Also sounds like OP's mortgage's lender/servicer has atrocious user interface for making payments.

Fold with highly variable income might prefer to “push” the next payment down the road

[Hyperchicken]

Fold with highly variable income might prefer to “push” the next payment down the road

Did you mean highly variable income and a habit of spending every penny they have?

[Dottie57]

I still doubt that you can be somehow charged interest in advance on money that you no longer owe.
...

Well, that's a fact that lenders do that. You can doubt that, of course.

You are not "charged interest in advance" though. You are making future payments ahead of time. Those payments then get credited as of their due date each. Until their due date they just sit there, out of your pocket but not yet credited towards your mortgage. Then as payments come due, they come out of the limbo and get credited, and it is at that future moment that you are charged accrued interest, as you would be if you made these same payments normally.

Are you saying there are mortgages out there that do no allow for pre-payment of loan principal?

[Hyperchicken]

Are you saying there are mortgages out there that do no allow for pre-payment of loan principal?

No, that is not what I am saying.

[blortchplop]

Did you put a note that you wanted the payment to apply to principal?

Please read the posts

I guess if I get posted on the ISS for the next 13 months I did the right thing.

OP is a grade A baller. Respect.

I paid off my mortgage early, and the credit union that serviced it had a really nice system. Extra payments went to principal, and they also reduced the amount and pushed out the date of the next required payment. When I closed on the house, the credit union rep explained that they had some nice way of computing the impact to interest owed—something about calculating things on a daily basis in such a way that the annualized rate met the loan terms.

[PeterA007]

For those still following along:

The loan operations officer replied as follows. She did not address or respond to any of the points or questions I made.

So its off to Consumer Financial Protection Bureau


'Should you wish your additional payments be applied to principal reduction only, without any interest being paid,
we require that you provide that direction to us. Otherwise you are paying your loan ahead of your due date, as reflected
in your current due of 9/21/2025'.

As a reminder, never before was this requirement published or made known anywhere.

[blortchplop]

For those still following along:

The loan operations officer replied as follows. She did not address or respond to any of the points or questions I made.

So its off to Consumer Financial Protection Bureau


'Should you wish your additional payments be applied to principal reduction only, without any interest being paid,
we require that you provide that direction to us. Otherwise you are paying your loan ahead of your due date, as reflected
in your current due of 9/21/2025'.

As a reminder, never before was this requirement published or made known anywhere.

And for things going forward... "we require that you provide that direction to us." Ok, provide how? In a letter sent with a mailed check? I hope that's an abbreviated quote and they gave you explicit instructions for the future.

It might be less hassle to accept that your prepayments so far only pushed out the date of the next required payment and continue to make regular payments until that time but actually apply them to principal. With apologies for punting on the math, would that solution come out roughly the same as fighting this and getting them to retroactively apply the early payments to principal?

[InvisibleAerobar]

For those still following along:

The loan operations officer replied as follows. She did not address or respond to any of the points or questions I made.

So its off to Consumer Financial Protection Bureau


'Should you wish your additional payments be applied to principal reduction only, without any interest being paid,
we require that you provide that direction to us. Otherwise you are paying your loan ahead of your due date, as reflected
in your current due of 9/21/2025'.

As a reminder, never before was this requirement published or made known anywhere.

Sorry to hear of the callous attitude you experienced.

If I were in your shoes, in my compliant to CFPB, I would stress the following.
-1) cover page from your loan disclosure, showing that there is no prepayment penalty;
-2) options your lender gave you when you attempted to pay extra toward principal, emphasize that neither options given really describes an extra principal payment and how confusing the set-up is;
-3) show actual extra payment made, ideally via statements from lender;
-4) show just how difficult your lender makes it to make principal only payment. The communication you received today shows that it recognizes you cannot make principal-only payment online.

That's for setting forth the facts section of your complaint. The complaint also has a section for remedy sought. For this section, ask for retroactive application of previous extra payments to principal only. This is trivial to do on the part of the lender. The lender may or may not retroactively adjust going all the way back a year, but even then, you can ask for certain parts of it to be retroactively adjusted (say for the last six months).

[capran]

When we were making extra principal payments we noted right on the check "extra principal payment". at one point, when we checked, the bank had applied quite a few of the checks for interest. I met with a loan officer with copies of the cancelled checks with the notes "extra principal payment' noted. They fixed it retroactively since it was clearly their mistake. Document, document, document!

[PeterA007]

For those still following along:

The loan operations officer replied as follows. She did not address or respond to any of the points or questions I made.

So its off to Consumer Financial Protection Bureau


'Should you wish your additional payments be applied to principal reduction only, without any interest being paid,
we require that you provide that direction to us. Otherwise you are paying your loan ahead of your due date, as reflected
in your current due of 9/21/2025'.

As a reminder, never before was this requirement published or made known anywhere.

Sorry to hear of the callous attitude you experienced.

If I were in your shoes, in my compliant to CFPB, I would stress the following.
-1) cover page from your loan disclosure, showing that there is no prepayment penalty;
-2) options your lender gave you when you attempted to pay extra toward principal, emphasize that neither options given really describes an extra principal payment and how confusing the set-up is;
-3) show actual extra payment made, ideally via statements from lender;
-4) show just how difficult your lender makes it to make principal only payment. The communication you received today shows that it recognizes you cannot make principal-only payment online.

That's for setting forth the facts section of your complaint. The complaint also has a section for remedy sought. For this section, ask for retroactive application of previous extra payments to principal only. This is trivial to do on the part of the lender. The lender may or may not retroactively adjust going all the way back a year, but even then, you can ask for certain parts of it to be retroactively adjusted (say for the last six months).

Thanks. I did exactly that also showing all correspondence.

[PeterA007]

And for things going forward... "we require that you provide that direction to us." Ok, provide how? In a letter sent with a mailed check? I hope that's an abbreviated quote and they gave you explicit instructions for the future.
NEGATIVE. THEY GAVE NO INSTRUCTIONS.


It might be less hassle to accept that your prepayments so far only pushed out the date of the next required payment and continue to make regular payments until that time but actually apply them to principal. With apologies for punting on the math, would that solution come out roughly the same as fighting this and getting them to retroactively apply the early payments to principal?
[/quote]
THIS MAY BE A REASONABLE PATH. BUT LESS FUN. ALSO SAY I WANTED TO PAY OFF THE ENTIRE LOAN TODAY. HOW WILL ALL OF THESE EXTRA PAYMENTS BE APPLIED ? THEY SHOULD BE 100 PCT REDUCING PRINCIPAL( PAYOFF AMOUNT). NOT FOR A PORTION OF THOSE PAYMENTS FOR PAYING INETREST

[PeterA007]

When we were making extra principal payments we noted right on the check "extra principal payment". at one point, when we checked, the bank had applied quite a few of the checks for interest. I met with a loan officer with copies of the cancelled checks with the notes "extra principal payment' noted. They fixed it retroactively since it was clearly their mistake. Document, document, document!

THIS WAS ACH PAYMENTS THRU THEIR PORTAL. NOT PAPER CHECKS.
YES EVERYTHING IN LIFE SHOULD BE DOCUMENTED NOWADAYS. BUT THAT IS NO EXCUSE FOR A BANK TO RANDOMLY DECIDE TO APPLY EXTRA PAYMENTS TODAY TO FUTURE PAYMENTS DUE 12 MOS IN THE FUTURE. THAT PROCESS IS ALSO NOT STATED ANYWHERE IN THE LOAN AGREEMENT. THEY CANT JUST MAKE UP REQUIREMENTS AND PROCEDURES TO THEIR BENEFIT AS THEY GO ALONG.

[Hyperchicken]

OP, I know you are frustrated, but all caps makes it difficult to read for people who are trying to help you.

[PeterA007]

OP, I know you are frustrated, but all caps makes it difficult to read for people who are trying to help you.

Sorry, I got carried away. Wont happen again

[Beensabu]

Why would anyone want to prepay monthly payments 13 months in advance rather than pay down principal

I would. I once accidentally made a payment to principal thinking I was paying the monthly payment ahead. I had done the current month, the next month, and then tried for the following month (but that last one went to principal). That was a real bummer as it screwed my budget (and I didn't realize until I went to pay another month ahead). Some people might just want to make sure they've got a buffer for whatever reason.

It sounds like they can't retroactively apply all those payments to principal (probably because that would be a huge pain when it comes to the amortization schedule), but at least they can make sure your next year's worth of payments are (as long as you specify each time).

And for things going forward... "we require that you provide that direction to us." Ok, provide how?

If you click the "pay down to $0" option, can you still enter a specific payment amount? If so, that would appear to be the "apply towards principal" option. There is a difference between "pay off" and "pay down".

Also, didn't you say there's a "Note" field when making the payment online? Write "extra payment towards principal" in there.

Ever since my "accidentally paid towards principal" snafu, I always put a note: "regular pymt due XXX" just in case.

And after you make the payment, go in there and check that it was applied the way you wanted it to be. They can fix it for you if you inform them in a reasonable timeframe (which is undoubtedly less than a year, and probably less than a month).

[PeterA007]

She told me verbally 'Pay down to $0' was a function to pay off the loan

And for things going forward... "we require that you provide that direction to us." Ok, provide how?

If you click the "pay down to $0" option, can you still enter a specific payment amount? If so, that would appear to be the "apply towards principal" option. There is a difference between "pay off" and "pay down".

Also, didn't you say there's a "Note" field when making the payment online? Write "extra payment towards principal" in there.

Ever since my "accidentally paid towards principal" snafu, I always put a note: "regular pymt due XXX" just in case.

And after you make the payment, go in there and check that it was applied the way you wanted it to be. They can fix it for you if you inform them in a reasonable timeframe (which is undoubtedly less than a year, and probably less than a month).
[/quote]

[blortchplop]

And for things going forward... "we require that you provide that direction to us." Ok, provide how? In a letter sent with a mailed check? I hope that's an abbreviated quote and they gave you explicit instructions for the future.

Negative. They gave no instructions.

It might be less hassle to accept that your prepayments so far only pushed out the date of the next required payment and continue to make regular payments until that time but actually apply them to principal. With apologies for punting on the math, would that solution come out roughly the same as fighting this and getting them to retroactively apply the early payments to principal?

This may be a reasonable path. But less fun. Also say I wanted to pay off the entire loan today. How will all of these extra payments be applied ? They should be 100 pct reducing principal( payoff amount). Not for a portion of those payments for paying inetrest

I get that this is super frustrating, and they're not doing anywhere near a good job helping you out. And I can understand digging in in this situation and considering at matter of fairness / justice / etc. All of that said, sometimes the best revenge is living well. Think what would be best for you personally going forward, considering the past is immutable.

[PeterA007]

And for things going forward... "we require that you provide that direction to us." Ok, provide how? In a letter sent with a mailed check? I hope that's an abbreviated quote and they gave you explicit instructions for the future.

Negative. They gave no instructions.

It might be less hassle to accept that your prepayments so far only pushed out the date of the next required payment and continue to make regular payments until that time but actually apply them to principal. With apologies for punting on the math, would that solution come out roughly the same as fighting this and getting them to retroactively apply the early payments to principal?

This may be a reasonable path. But less fun. Also say I wanted to pay off the entire loan today. How will all of these extra payments be applied ? They should be 100 pct reducing principal( payoff amount). Not for a portion of those payments for paying inetrest

I get that this is super frustrating, and they're not doing anywhere near a good job helping you out. And I can understand digging in in this situation and considering at matter of fairness / justice / etc. All of that said, sometimes the best revenge is living well. Think what would be best for you personally going forward, considering the past is immutable.

Au Contraire,
We seek justice. If our founders took your advice we would still be living under British rule.
We have not yet begun to fight. We have yet to see the whites of the eyes of the Senior Loan Operations Manager of this hillbilly run bank.
My only regret is I have but one life to give to the resistance.
I would rather lose the fight and see this as the longest running thread in Boglehead history!

[blortchplop]

Au Contraire,
We seek justice. If our founders took your advice we would still be living under British rule.
We have not yet begun to fight. We have yet to see the whites of the eyes of the Senior Loan Operations Manager of this hillbilly run bank.
My only regret is I have but one life to give to the resistance.
I would rather lose the fight and see this as the longest running thread in Boglehead history!

I'll just refer to my prior statement in this thread.

OP is a grade A baller.

[toddthebod]

She told me verbally 'Pay down to $0' was a function to pay off the loan

It doesn't matter what she told you. When you click on the button, can you enter a custom amount?

[Beensabu]

And for things going forward... "we require that you provide that direction to us." Ok, provide how? In a letter sent with a mailed check? I hope that's an abbreviated quote and they gave you explicit instructions for the future.

Negative. They gave no instructions.

Can ask them if writing "payment to be applied toward principal" in the "Note" field will be sufficient direction?

And if they say "No", then ask them what sufficient direction would be.

[InvisibleAerobar]

I get that this is super frustrating, and they're not doing anywhere near a good job helping you out. And I can understand digging in in this situation and considering at matter of fairness / justice / etc. All of that said, sometimes the best revenge is living well. Think what would be best for you personally going forward, considering the past is immutable.

I think your attitude works in many avenues of life. Something should have been done a certain way but wasn't, and while there could be a monetary remedy, the damage cannot be fully undone.

This is literally one of the few cases where it is exceedingly trivial for the lender to own up to and fix its mistake. Roll everything back to a year ago, apply the extra payments correctly, and everything is adjusted to where it should.

You asked upthread if things are roughly the same if the lender just applies the extra payment toward principal today (as opposed to retroactively applying it).

What this doesn't capture is that the bank gets to pocket extra interest. My math skills are hazy, but it's to the tune of the sum of the series of PMT * ((1+rate/12)^n)-1), summed iteratively for n from 1 to 12 (since the first incorrect application of extra payment occurred 12 months ago).

[PeterA007]

She told me verbally 'Pay down to $0' was a function to pay off the loan

It doesn't matter what she told you. When you click on the button, can you enter a custom amount?

This gets more ridiculos...

I just tried to make a payment via the'Pay down to $0' button.
It didn't even work! I couldnt input anything when trying to enter a custom number.

This is what it says above that window.
"Please note: Using the “Paydown to $0” option does not pay off your loan. Please contact us for your final payoff amount and to close your loan".
In the 'Amount' window for that button there is a shaded number which is the full loan balance.
That seems pretty clear that even if it was working, that button is meant to pay off the loan entirely.

I