I Need Education From a Banker or Finance Specialist - Posted by soapymac

Posted by BR on March 20, 2000 at 07:16:44:

Hi Phil, if you feel more comfortable with the second check by all means do so however, it is not necessary to write a second check. I’ve been paying extra by just one check since the inception of one loan in particular with no problems. All that is necessary is to tell them where to apply the extra funds. I believe there is a federal law that requires them to do so if instructed. It is a great idea to pay extra especially early in the life of the mortgage where you will gain the most benefit by doing so.

I Need Education From a Banker or Finance Specialist - Posted by soapymac

Posted by soapymac on March 19, 2000 at 20:13:41:

When you have a conventional mortgage you pay so much per month for a certain period of time. I know you can pay down a conventional mortgage by making additional payments.

I have been told that when you make those additional payments, the bank can credit the extra money any one of five different ways…only one of which helps me as payee, with the other four being to the bank’s advantage.

Can anyone explain the five ways? Assume no prepayment penalty.

Thanks,
Roy MacLean
"soapymac"

Apply to Principal - Posted by BR

Posted by BR on March 19, 2000 at 23:36:52:

Fill in the payment stub and apply the extra to the principal.

Re: I Need Education From a Banker or Finance Specialist - Posted by David Alexander

Posted by David Alexander on March 19, 2000 at 20:20:06:

Was this… like a quiz a something?

late charges, penalties, interest, attorneys fees, and principal.

Principal being your principal paydown to your advantage unless you have a good interest rate and a better use for the money.

David Alexander

Re: I Need Education From a Banker or Finance Specialist - Posted by Dave

Posted by Dave on March 20, 2000 at 24:22:07:

Don’t forget escrow. Unless specified as additional principal, the bank could just deposit any extra payment to the escrow account.

David, Forget the late charges and stuff… - Posted by soapymac

Posted by soapymac on March 19, 2000 at 20:28:14:

Although they are important considerations. My main concern for my question is: ‘how is any additional money paid into the contract’ applied? How do I ask (or demand) to make sure that if I make additional payments to principal…that the amount is applied to best serve MY interests and not the banks?

Cordially,
Roy MacLean
"soapymac"

Re: David, Forget the late charges and stuff… - Posted by David Alexander

Posted by David Alexander on March 19, 2000 at 20:34:19:

those are the places the money can be applied. If everything is current the only place left to apply a payment is either principal or interest.

The only other way I could see something happening is if the bank applied the extra monies to the next payments thereby splitting the money between principal and interest.

I would just make out tow checks one that says payment with the coupon and one that says pricipal only and a note attached to it.

There is usually a place on the bank coupons to make extra money payable to principal.

David Alexander

Re: David, Forget the late charges and stuff… - Posted by phil fernandez

Posted by phil fernandez on March 20, 2000 at 06:35:55:

Hi Soapy,

Good seeing you posting again.

I agree with David. I write out two seperate checks. One for the actual monthly mortgage payment and the second for whatever you are paying extra to reduce the principal.

Write on your second check, " reduction of principal " or “principal only payment”. You can verify that the amount of your “principal only” check was applied correctly to reducing the principal when you get your next payment bill. Check on the stub and look at the balance to make sure the reduction has taken place.

And of course you will have your processed check for further proof.

For Phil and BR… - Posted by soapymac

Posted by soapymac on March 20, 2000 at 12:20:59:

Thanks to you both. That information was what I was looking for. (It’s good being back, Phil.)

BR, you bring up an interesting thought. Can anyone elsenail down the federal law about which you speak?

Cordially,
Roy MacLean
"soapymac"