Re: Advise on finance question

One need not do that. Any payment to a mortgage account, between due dates, is automatically applied to the principal. Interest on a mortgage is calculated monthly on the balance due. The interest due, on the subsequent regular mortgage payment, is therefore calculated at the new lower balance. Although the mortgage payment remains the same the number of subsequent payments required will be reduced

mike hunt

ANY funds the bank receives in a regular payment go towards principle reduction.

A check for $3000 finds its way to the bank. the bank takes its earned interest for the previous 30 day period, then applies a fixed amount to an impound account (if one exists) then applies the entirety of the remainder to principal reduction. If the interest earned is $500, and the impounds are $300, then $800 goes to these two fixed costs. Any remaining amount is credited agaisnt the outstanding principle balance.

There is no need to send a separate check or memo.

Tell that to Countrywide Mortgage in California.

-- Mike Harris Austin TX

The banking laws apply to all lending institutions, yours is no exception.

mike hunt

YOU tell them.

What I described is the root of federal consumer protection laws. You are required to make a payment every 30 days. The bank is allowed to collect interest in 30 day increments. Any funds you give them MUST go towards principle reduction. The result of any principle reduction today is a reduction in the loan term tomorrow. The payments remain fixed, but your overpayments today will reduce the term tomorrow.