Woman irked after huge mortgage payment

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Dear 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

Dear 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.

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