Is there a way to double check your mortgage lender. We have a 30 year fixed rate mortgage, taken out 2013. We have made extra principle payments when we were able. Some years we made no extra payment, some years we made $500-$1000 extra principle payments per month. The last two years it was consistently more than that.

I can see the balance of the loan. Is there an accountant, or someone, who can check their calculations to be sure that the appropriate amount of interest payments are applied/credited correctly?

Thanks

Look at your old statements when you only paid the required amount then look at the statements with the extra principle applied. You should be able to see when the extra money is going.

When I look at my account online it shows the breakdown of how much went to principle, interest, escrow, etc. Maybe you can create an online account with your mortgage company.

Just take your statements and go line by line in a mortgage calculator. It will be a pita doing it that way. Every time you make a pricipal only payment I would think you would have to start a new calculation. But there may be an easier way. Maybe there's a calculator on line that let's you enter extra payments line by line.

Maybe something like this?

https://www.bankrate.com/calcu...ment-calculator.aspx

A CPA should be able to help.

Maybe download some Excel spreadsheets for simulating mortgage payments and plug in all your data? The balances and interest amounts should match your statement data if it's set up with your mortgage info correctly.

A while back I did that with our mortgage and found the bank wasn't applying the extra payments at all. They were just taking the extra money. Only a threat to involve a lawyer got them to admit they weren't applying the extra payments and to fix their interest and principal amounts.

quote:

Originally posted by bryan11:
A while back I did that with our mortgage and found the bank wasn't applying the extra payments at all. They were just taking the extra money.

Yep. Some mortgage companies will require that you specify on the payment that it is to be applied specifically to principal, or sometimes require additional steps or methods. Otherwise, any overpayments or extra payments are simply held as partial prepayments of the next months' amount due. The lender on my last house was that way.

Other lenders will automatically apply any overpayment towards principal, without requiring jumping through any extra hoops. My current lender is this way.

You'll want to verify how your current mortgage holder handles it.

quote:

Originally posted by RogueJSK:
Yep. Some mortgage companies will require that you specify on the payment that it is to be applied specifically to principal, or sometimes require additional steps or methods. Otherwise, any overpayments or extra payments are simply held as partial prepayments of the next months' amount due.

This ^^^^^

Furthermore: A 30-year fixed mortgage is going to show very, very little reduction in principal after merely 7-8 years and "balance of the loan" ≠ principal.

The calculators are difficult to plug in added payments. I’ve resorted to checking every statement. My company lists them as payment against principle.

Easy to do with an Excel spreadsheet. Just make sure your dates are the same as the lenders. As noted above, some lenders apply partial prepayments to a segregated escrow account rather than principal reductions. It will take some time to recreate a 8 year old loan but may be worth it.

Call me a simpleton but I’m not quite understanding the question. Every mortgage statement I’ve ever received is pretty clear. Mortgage payment = principal + interest + escrow. When I’ve sent in extra payments it’s pretty easy to tell because the loan balance drops by the principal + extra payment.

So are you concerned they aren’t applying your extra principal payments? That should be easy to track down. I have always heard the horror stories of a mortgage holder applying extra payments to interest or escrow so some such nonsense but that seems to be more a thing of the past because not only is it unethical it’s borderline illegal. Still, worth checking out. Or are you worried they are applying the loan rate to the original number and discounting the extra payments? Certainly this could happen but it would be a pretty big friggin mistake on their part.

Either way I doubt you should need a CPA if you understand a calculator and have the last few months of statements. Worst case, pull all that out and call them and let them explain it to you.

I think the OP is concerned that after a principal only payment have the interest charges been correctly reduced since the open balance has declined. This becomes even more difficult to follow if taxes and insurance are escrowed and pro rated.

It is easily done in Excel. Feel free to email me if you want.

We paid off our mortgage several years ago, but I do recall that the monthly statement showed any extra principal that had been payed the prior month, and the payment coupon on the bottom of the monthly statement had a space for extra payment towards principal on the current month's payment. That was with Chase.

Our mortgage did not originate with Chase, matter of fact, it was handed off from one bank to another, several times. I recall that one of the banks usually screwed up extra payments, so I solved that problem by writing two checks: the first one for the "normal" amount, and a second check for extra principal, with an annotation on the memo line of the check, "Apply to Principal" and the loan number, and used a yellow highlighter on that memo. That worked.

quote:

Originally posted by V-Tail:
We paid off our mortgage several years ago, but I do recall that the monthly statement showed any extra principal that had been payed the prior month, and the payment coupon on the bottom of the monthly statement had a space for extra payment towards principal on the current month's payment.

Understand that a large chunk of the population no longer uses mortgage coupons or mailed checks. The majority of bills, including mortgages, are billed and paid electronically these days. And most people under 30ish have never even written a check at all. (I personally write about 1 check per year. Usually to pay a forum member who doesn't accept electronic payments for an item in the classifieds. )

The days of getting a statement in the mail, filling out a coupon, writing out a check, and mailing it all back are nearly over.

Most mortgage companies realize this, and have robust online accounts that present you with the same (or even more) information as the mailed statements and coupons of old. But it's possible that there may be a few behind-the-times companies out there that offer electronic billing and payment but haven't quite caught up with providing their customers with a well-organized online account for their loan info, or the means to easily designate whether an incoming electronic payment is intended for the monthly payment or as extra towards principle.

Before making extra principle-only payments, it's a good idea to talk with the bank and make sure any extra payments beyond the minimum due is applied to principle.

The bank can probably provide a payment breakdown for you, showing your payments and how they were applied.

I had a personal loan where if I made a payment online, it would go towards future payments instead of the principal. I had to call them to make principal only payments and that cost me and them time. Was always on hold for 20-25 minutes before getting a rep. Asked them why they did that and they claimed it was because when they used to offer a principal only payment online, people complained that it didn't reduce their next month's payment.

Never again will I bank with PenFed. USAA is no issue. When I pay my car note, it asks for the amount, date and what I want to apply that payment to: principal and interest or principal only.

quote:

Originally posted by RogueJSK:

The days of getting a statement in the mail, filling out a coupon, writing out a check, and mailing it all back are nearly over.

Yeah, I did have the option of doing it all on line. I chose not to do that. I passed by a bank branch on my way to the airport every morning, so I went through the drive-through and passed the paperwork through window.

When I gave them one check, with the coupon marked appropriately for extra payment to principal, they would screw it up. Every. Steenkin'. Time. I was able to catch the error, because I looked at the payment receipt before driving away, but it was a Royal Pain In The Ass. That's when I had the "Aha!" moment, and started writing two checks, one for the scheduled payment amount, and the second for the extra principal.

---

The kicker came when I was down to the last couple of payments. I just wrote a check for a few bucks over the amount due, to cover any surprise interest, and mailed it. They called me and wanted me to come in to their office for the close-out payment. I told them that would not be convenient for me, but they were welcome to come to my office at the airport. They decided that they could, in fact, handle it by mail.

You can set up a spreadsheet and check the computations assuming you have record of every payment you've made.

If you have someone check the computations you can also ask them to test the escrow balances. You'll need a few extra documents for that one. (Basically records showing what was paid from the escrow accounts)