Mortgage Prepayment Posted to Interest

[ldstone57]

What is the name of your state? Virginia

I just made the 1st payment on a 15/30 Balloon Conventional Second mortgage. The loan documents state the loan can be prepaid without penalty. The payment due was $106 - I paid $518. I just received my next statement which shows they applied the extra to the next 3 months (w/principal & interest consistent w/the original amortization), then applied Additional principal of $90.84 to my November payment (4 months away). I was expecting, of course, to see the additional $412 posted against principal this month. By the way, I did NOT send anything stating to post it against principal (I pay via Checkfree and don't know how to go about this). Otherwise, am I missing something here? Can they do this?

 

[nextwife]

Have you CONTACTED their customer service department and asked if this can be corrected to reflect your intent?

Otherwise, just make the next few payments as scheduled and request they be applied to principal. It will balance out.

 

[HomeGuru]

And next time, write specifc instructions in a cover letter on how the lender should apply the monies and request a statement after the principal payment has been applied.

 

[herkxena]

And next time, write specifc instructions in a cover letter on how the ledner should apply the monies and request a statement after the principal payment has been applied.

I would add that you should also make a note on the actual check regarding the payment. Either state "prepay principal" or "apply as principal reduction".

I state this as the lender/loan servicer may ask for a copy of the canceled check. If either of those 2 statements are on the check, the lender can't say they weren't informed and will have to reapply the payment to your loan as you intended. There is always the chance that if you send a cover letter, the cover letter may be separated from your check.