Huntindog wrote:
# 1 All I am going to say, is everyone needs to read their loan documents. They will specify how payments are applied. And how interest is calculated. And what is in the documents is how it will work....
#2 Writing a note with an extra payment DOES NOT change the loan contract that you signed.
#3 BTW, Everytime I bought a house, thay always figure in a set amount of DAYS (usually 15) interest into the loan for closing purposes.
#4 Many years ago, I accidently made an extra house payment. Upon discovering my mistake, I decided to skip the next payment, as I was a payment ahead.... I was charged a late fee, and had to make that next payment! Because my loan contract specified that extra payments were to go to reducing the principle of the loan, and that monthly payments were required!
Bottom line.... READ your loan documents!
No need to get huffy.
#1 Correct, you are signing a legal binding contract, they are going to hold you to the terms you agreed to whether you read and understand them or not.
#2, No where have I said that writing a note will change the loan contract.
Back in the day, banks sent you a FULL COUPON BOOK OF PAYMENTS FOR THE YEAR. On those coupons you had A SPECIFIC SPACE WHERE YOU SPECIFIED ANY EXTRA AMOUNT BEING SENT AND HOW YOU WANTED THAT AMOUNT TO BE APPLIED.
Fast forward to today, with advent of direct account access they may or may not send a payment book, HOWEVER YOU CAN STILL ADD EXTRA MONEY TOWARDS THE PRINCIPLE provided it is a open ended loan (if you do not know what a open ended and closed ended loan, LOOK IT UP AND LEARN.
We have done this with not only a mortgage but FIVE VEHICLES over the years and have never had any issues with the banks not following our direction on how to apply the extra funds.
With direct auto payment loans you can simply go to your lender bank and specify that you want to pay extra towards your principle. It IS that simple.
#3 I see where you got confused (and anything to do with a home mortgage IS confusing to start with)..
Banks like a lot of businesses do a financial closing of their books on a MONTHLY BASIS. This typically is at the end of the month and can follow into the beginning of the next month.
They typically will want to have your payment due before or after that monthly closing so typically your payment date will either be due the first week of the new month or on the last week of the month.
SO, they will often PRORATE the interest owed if you sign in between those times on to your first payment in order to get you on to THEIR PAYMENT CYCLE. You don't pay more interest over all (just the first payment will not apply quite as much towards the principle), it is nothing more than a accounting and payment timing thing..
#4 You made a mistake and assumed that you could "skip" a payment, your fault for not ASKING THE BANK WHAT TO DO, not the banks fault.
YES, THE BANK WANTS PAID, you failed to pay them as required.
NOT ALL bank loans specify that any extra funds will be applied to the principle (NONE OF MY LOANS HAVE EVER HAD THAT SPECIFIED) and that is WHY IT IS IMPORTANT TO TELL THEM THAT IT IS TO BE APPLIED THAT WAY.
All else fails and you don't understand something SPEAK UP AND ASK! Banks will not bite you if you ask to have a clarification.
As long as the loan is an open ended loan most banks will be happy to apply $1 or thousands of dollars towards the loan principle, heck they will have no problem getting a loan payoff amount IF YOU ASK THEM. You do not need to apply a huge sum of money, even an extra $10 per month applied to the principle CAN make a huge difference in loan length and the interest you will pay.
I am sure the OP is long gone by now..
