mortgage

Woman irked after huge mortgage payment

Don Taylorq_v2.gifDear Dr. Don,
I have a mortgage loan with Wells Fargo Bank. On Jan. 29, I made an additional home mortgage payment to the principal balance in the amount of $45,000. That amount was posted on Feb. 1 and placed in a suspense account.

My monthly mortgage account is via automatic bank draft on the 10th of each month. On the 10th, I was charged the interest for the whole month and then the $45,000 was deposited toward the principal balance.

I do not agree that the bank held the $45,000 for 10 days. I feel that this large sum should have been applied to the principal on Feb. 1, minus the accrued interest since the last mortgage payment. I wrote several e-mails, but Wells Fargo refused to do so. Please let me know if they are correct.
-- Linda Laments

a_v2.gifDear Linda,
I'm going to side with the lender on this one. The bank has the right to delay the posting of the check to the account based on normal and customary check-clearing procedures. You could have wired the funds, or perhaps used a cashier's check, but you didn't. The money you saved by not wiring the funds you lost on the interest, and a little more, but we're not talking about a lot of money.

Assuming an interest rate of 6 percent on the mortgage, you're out about $75 for losing 10 days of interest on $45,000. The wire fee would probably have been about $25. Net, you're out $50 by not choosing to make the payment by wire. Compare that to the money you saved over the remaining term of the mortgage by making this large additional mortgage principal payment and it's a molehill, not a mountain. Let it go.

Home mortgage interest is typically paid in arrears. The breakdown of the February payment is based on the interest expense for January. Depending on due dates and grace periods, the day count for the lost interest is looking forward to the March payment and not the February payment.

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & Investing" or "Money."

News alert Create a news alert for "mortgage"

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE & REAL ESTATE NEWSLETTER

Timely market news and advice for consumers ready to buy, sell or invest in real estate. Delivered weekly.

Blog

Holden Lewis

Cautious BofA heeds history

Remember the wise decision that Bank of America made in August 2001 in light of the decision it's making now.  ... Read more

advertisement
Partner Center
advertisement

Connect with us