Mortgage payment calculation

[Snnipe_70E]

I had a mortage with my credit union and at forst they were using the date the check was recieved to calculate the account. If one month I payed on the 20th more of the payment went to the principle and less to interest. If the next month I paid on the 30th then because there was 40 days there would more interest than payment.

After a few years they asked me to come in because there was a problem with my account and they wanted a face to face. According to the manager what they had been doing was agianst banking laws. What they should have been doing was calculate the monthly interest based on daily interest 28, 30, or 31 days. Add the interest to the ballance, then substract any payment. These calculations should have been done on the 1st.

If your payment is in the grase period then it is subtracted from the ballance when recieved. After the grace period late payment and payment is due. If you pay any less than the amount due you are behind in your payments. So on the next 1st interest is added again to the balance any payment recieved are substracted. If the total amount due is not paid you loan is still behind.

As far as the “advancing the due sate”. Your loan is current or behind that is all.

[CurtC]

@cmosdes

If the bank had only your outstanding balance and interest accrues daily, then they would be charging interest on interest.

Yes, and… ?

The bank keeps records of the loan just as sailor described - at any point, they know your outstanding balance, and each day they subtract any payments you’ve made, add any charges, and add that day’s interest on the balance outstanding.

[muttrox]

@CurtC

What it gets down to here, is the question of what triggers your mortgage company to consider your 2/1 due date as “paid.” If you pay the same amount as your regular payment on 1/15, will they then consider that you’ve made your 2/1 payment, or will they think it’s simply that you’re paying extra and still intend to pay again by 2/1?

My bank assumed that it was an early payment for 2/1. Then I called them and requested that any extra payments be counted towards principle, that I would still pay on 2/1. Then we refined it more - extra payments go towards getting two months ahead of schedule (just in case I get laid off or something), anything after that is towards principle.

So in my case, the default was early payment for 2/1, but they can set it up in other ways also.