I Want To Pay Extra on Our Mortgage, BUT....

[Deleted]

When we bought our house, I planned to pay a little extra on the mortgage principal each month, to shave at least a little time off the mortgage and worry about paying it off before DBF retires later. As I understand it, you get the biggest bang for your buck by doing that in the early years of a mortgage. Please correct me if I’m wrong.

It’s a 30 year mortgage and I will retire before DBF does. I’m older than him and would retire tomorrow if I could, he OTOH probably wouldn’t know what to do with himself if he didn’t have to go to work every day, regardless of his financial situation. My other house will either be sold or paid off before I retire.

Our lender sold the loan immediately after we closed, before the first payment was even due. They sold it to a company that has HORRIBLE reviews. Reviews that include multiple payments in one month for customers that set up auto-pay, and foreclosures on properties that weren’t even actually delinquent. Bad service and terrible record-keeping. So bad that they actually changed their name right after our loan was sold to them (to a ridiculous name that doesn’t inspire confidence and wouldn’t allow me to take them serious even had I not read all the horrible reviews. But that’s just me.) in an effort to improve their image, but the horrible reviews continue.

So DBF, who has most of his bills set up in auto-pay, refuses to do that with them, which I agree with. But more importantly, I’m hesitant to trust them to calculate things correctly and keep everything straight if we do extra payments.

Considering this company’s track record, would you do? Extra on the principal or no?

[Tennesseer]

PC-try paying a little extra toward the principle each month and then check their website and your mortgage payments to see if your extra is being applied toward the principal.

With the bank which holds my mortgage, anything added to the basic monthly payment automatically goes toward the principal.

I do not do auto-pay with my mortgage.

[Sharon]

My mortgage company just had a name change, and they are stupid.  I didn't have the issues I have now until the name change.  That said I pay extra each month but I pay by check and and send in a payment stub indicating how much extra is to go to principle.  Then I log on about a week later and make sure it shows correctly.  So far no issues with that and I have been doing this for not quite two years.  The name change happened in the last year or so.  However; I have received notices that my escrow account was in arrears.  Um what escrow account I don't have one as I pay my taxes and insurance myself.  The customer service person was yeah I can see you don't have an escrow account I don't know why you got that letter.

[msventoux]

Do they have a website you can log into to process electronic payments that you initiate? My mortgage was immediately sold to Wells Fargo. I tried auto pay with them twice and they managed to screw it up both times. Now I just log on every month and initiate the payments manually. I can make my regular payment and/or an extra principal payment. I’ve been doing that for several years and they’ve managed to apply every payment correctly so far.

[Deleted]

I would not, but for a different reason.  I don't know how you and DBF manage your money, but would it be your money that would be paying the extra principal?  If so, you would want to document, document, document that fact.  You may think you will never break up, but no one has that kind of crystal ball.  And if you do, most likely the equity in the house would be split 50/50 unless one of you provided more of the downpayment, etc.

I am not a romantic.  Sorry. 

[Tennesseer]

Dec 1, 2019 17:58:26 GMT -5 @bamafan1954 said:

I would not, but for a different reason.  I don't know how you and DBF manage your money, but would it be your money that would be paying the extra principal?  If so, you would want to document, document, document that fact.  You may think you will never break up, but no one has that kind of crystal ball.  And if you do, most likely the equity in the house would be split 50/50 unless one of you provided more of the downpayment, etc.

I am not a romantic.  Sorry. 

Good advice on documentation. As Judge Marilyn Milian of The People's Court states when exes appear in her court and are suing each other for moneys spent during their relationship, it's tough separating the pots and pans of a couple's life without documentation.

[NoNamePerson]

Dec 1, 2019 18:06:01 GMT -5 Tennesseer said:

Dec 1, 2019 17:58:26 GMT -5 @bamafan1954 said:

I would not, but for a different reason.  I don't know how you and DBF manage your money, but would it be your money that would be paying the extra principal?  If so, you would want to document, document, document that fact.  You may think you will never break up, but no one has that kind of crystal ball.  And if you do, most likely the equity in the house would be split 50/50 unless one of you provided more of the downpayment, etc.

I am not a romantic.  Sorry. 

Good advice on documentation. As Judge Marilyn Milian of The People's Court states when exes appear in her court and are suing each other for moneys spent during their relationship, it's tough separating the pots and pans of a couple's life without documentation.

 My friends said I was prepared for divorce! Even had two sets of pots and pans. Had two of everything except kids! Made things so much easier. Ok back to regularly scheduled program. No advice here except I agree with @bamafan1954 For obvious reasons.

[bookkeeper]

What is the interest rate on your mortgage?  If your rate is 3 or 4 percent, you may want to consider putting that extra house payment money in a taxable account.  Phil has explained the time value of money in mortgages/stock market at length and I came around to his way of thinking.

This would be a good work around for the OP since they are not married.  You can take your stock market stash and pay down your house in the years to come if you like, or finance some other purpose, like retirement, college, health expenses, etc.

I purchased my current house in 2015.  I had cash to pay for it, but chose to take a $60,000 mortgage at 3.3% to keep some cash back for planned repairs. The S&P 500 was at 2050 when I bought my house.  Today the S&P stands at 3140.  I am glad I listened to Phil's advice.  

I am really close to having this house paid off.  I understand the desire to pay that mortgage down as fast as you can, however doing so can cost your net worth more in the long run.  My first mortgage was at 9% in 1986.  That was a completely different set of circumstances.  Home buyers today are in a much better position with low interest rates. 

[TheOtherMe]

I can't remember the last time I've had coupons to mail in my house payment.

[Gardening Grandma]

Without auto pay, how do you make your payments?  I assume with coupons.  Does the coupon have a space for extra payments? If not, do they have an office where you can pay in person and tell them you want to pay extra?

I like the advice of trying it if you can verify it online.  Can you go online and look at your account?

It might actually be simpler to just set aside that amount in a separate account; if you wanted to, you could take the money once a year, or so, and put it on your loan.

[Cookies Galore]

Dec 2, 2019 11:38:32 GMT -5 Gardening Grandma said:

Without auto pay, how do you make your payments?  I assume with coupons.  Does the coupon have a space for extra payments? If not, do they have an office where you can pay in person and tell them you want to pay extra?

I like the advice of trying it if you can verify it online.  Can you go online and look at your account?

It might actually be simpler to just set aside that amount in a separate account; if you wanted to, you could take the money once a year, or so, and put it on your loan.

I log into my mortgage account each month to pay. When I click on the payment tab I can set up extra payments to principal if I want.

[Deleted]

Dec 2, 2019 11:38:32 GMT -5 Gardening Grandma said:

Without auto pay, how do you make your payments?  I assume with coupons.  Does the coupon have a space for extra payments? If not, do they have an office where you can pay in person and tell them you want to pay extra?

I can log in online and make a payment whenever I want.  It asks me where I want the money to go towards principal only.

[NoNamePerson]

Dec 2, 2019 10:56:39 GMT -5 TheOtherMe said:

I can't remember the last time I've had coupons to mail in my house payment.

In the 70’s most likely! At least that was my last set of coupons

[busymom]

We receive a monthly statement, & we mail in a portion with out payment each month.  We've caught a couple of mistakes made by our mortgage company, so I prefer a paper trail to keep them honest.  

[The Walk of the Penguin Mich]

Dec 1, 2019 18:06:01 GMT -5 Tennesseer said:

Dec 1, 2019 17:58:26 GMT -5 @bamafan1954 said:

I would not, but for a different reason.  I don't know how you and DBF manage your money, but would it be your money that would be paying the extra principal?  If so, you would want to document, document, document that fact.  You may think you will never break up, but no one has that kind of crystal ball.  And if you do, most likely the equity in the house would be split 50/50 unless one of you provided more of the downpayment, etc.

I am not a romantic.  Sorry. 

Good advice on documentation. As Judge Marilyn Milian of The People's Court states when exes appear in her court and are suing each other for moneys spent during their relationship, it's tough separating the pots and pans of a couple's life without documentation.

Very good suggestion, regardless of marriage status.  I posted about this a few years ago.

My sister recently got divorced.  When they bought their house, 100% of the 20% down came from the IRA she had before they were married (around $30k).  

Fast forward a couple decades, they are divorced and the house proceeds are to be split 50/50.  My sister wanted her down payment back first, THEN the proceeds split.  Only problem is that she has no proof that she pulled the money from her IRA. 

During those years, the mortgage got sold several times.  Her ex went on a shredding spree and shredded all the documents that my sister had proving the source of the down payment.  The money was pulled from accounts long enough ago that investment firms no longer have the information available.  She wound up having to let it go.

[Tiny]

I know the OP is making payments to a Mortgage Company and not a bank so the mileage may vary depending on their website and availability of statements on line.


Here's my anecdotal response: 

I've got mortgages with 3 different banks.    I went "paperless" after having a made a few payments (got use to the bank's website, got my monthly payment scheduled/set up).   I can always go to the banks website and see/download/print out my "monthly mortgage statement" that has info about the loan and the payment coupon at the bottom.  I think I look at these things once a year.    

I keep a predefined excel spreadsheet (the template for loan with amortization) that came with excel for each of my mortgages.   I used to check the spreadsheet balance against the bank's websites balance every month for years and years (usually when I was paying monthly bills).   The thrill/stress/annoyance of having a mortgage has worn off.. so I only check twice a year - usually  in June/July and then again in January/February because that's when the mortgage payment amounts usually change (increase in property taxes of increase in Insuance costs).  


As far as mortgage prepayments go...  if the loan has a low interest rate - I'd lean towards putting the extra $$ into an account and letting the money grow.   I'd start out with a savings account/high interest checking and as the $$ grew in size I'd maybe move a big lump sum to a CD with a good rate and let the $$ continue to accumulate in the savings/checking before doing another sweep to a CD or something else.        I guess it really all depends on how much money per year in pay down we're talking.   1 payment ($1K or less)  a years worth of payments ($10K per year)?     No one needs 10K sitting long term (more than a year)  in an account earning .01% or whatever the lowest interest rate is.         

[haapai]

I also hate my non-bank mortgage servicer.  They haven't done anything bad to me yet, but I still hate dealing with them, even through an automated service line that does not involve talking to another human.  

I hate the voice intro that reminds me that they are a debt collector.  I hate the financial entity's name.  I hate the way that their autopay option draws on the second of the month.   I hate and fear the insinuation that something that I did or something about me is the reason why they hold my servicing rights (and possibly my mortgage). 

My mortgage was sold prior to closing and I've sent money to four different entities during the last ten years without a hitch.  I do not have a low credit score.  I do not pay my mortgage late.  Yet somehow, I am dealing with an LLC that I'm embarrassed to even mention the name of. 

OTOH, after at least three years of paying by mail, I finally signed up for autopay and they correctly debited my account this morning. 

Oh yeah, yes, I'd have some reservations about paying extra to principal when dealing with this entity.  I'd definitely send the extra payment separately, make sure that it was credited to principal, and check math and dates.  I'd also take copious screen shots. 

[Deleted]

Dec 1, 2019 17:58:26 GMT -5 @bamafan1954 said:

I would not, but for a different reason.  I don't know how you and DBF manage your money, but would it be your money that would be paying the extra principal?  If so, you would want to document, document, document that fact.  You may think you will never break up, but no one has that kind of crystal ball.  And if you do, most likely the equity in the house would be split 50/50 unless one of you provided more of the downpayment, etc.

I am not a romantic.  Sorry. 

I’d forgotten I even started this thread lol.

No need to apologize. I guess I’m not much of a romantic either because I actually agree with your perspective. I’ve been aware of the pitfalls, potential complications and need to protect myself in case we do ever break up since we first started talking about buying a house.

Thank you for reminding me again though. 

[Deleted]

Dec 2, 2019 9:22:36 GMT -5 bookkeeper said:

What is the interest rate on your mortgage?  If your rate is 3 or 4 percent, you may want to consider putting that extra house payment money in a taxable account.  Phil has explained the time value of money in mortgages/stock market at length and I came around to his way of thinking.

This would be a good work around for the OP since they are not married.  You can take your stock market stash and pay down your house in the years to come if you like, or finance some other purpose, like retirement, college, health expenses, etc.

I purchased my current house in 2015.  I had cash to pay for it, but chose to take a $60,000 mortgage at 3.3% to keep some cash back for planned repairs. The S&P 500 was at 2050 when I bought my house.  Today the S&P stands at 3140.  I am glad I listened to Phil's advice.  

I am really close to having this house paid off.  I understand the desire to pay that mortgage down as fast as you can, however doing so can cost your net worth more in the long run.  My first mortgage was at 9% in 1986.  That was a completely different set of circumstances.  Home buyers today are in a much better position with low interest rates. 

The interest rate is less than 4%. I know it makes more dollars and cents to go this route, which I’ve also considered.

For the other posters, we do pay online, but have a paper statement mailed. There was some kind of confusion about our very first payment. I don’t remember exactly what happened, DBF handled it. I do remember he had to call them a couple times to get it resolved.

Thinking about it today, I think I prefer stashing what would have been extra payments. The mortgage amount and amount of interest bothers me. But I recognize that’s an emotional reaction and emotions don’t always help you make the best financial decisions.

[Deleted]

Dec 2, 2019 14:20:31 GMT -5 haapai said:

I also hate my non-bank mortgage servicer.  They haven't done anything bad to me yet, but I still hate dealing with them, even through an automated service line that does not involve talking to another human.  

I hate the voice intro that reminds me that they are a debt collector.  I hate the financial entity's name.  I hate the way that their autopay option draws on the second of the month.   I hate and fear the insinuation that something that I did or something about me is the reason why they hold my servicing rights (and possibly my mortgage). 

My mortgage was sold prior to closing and I've sent money to four different entities during the last ten years without a hitch.  I do not have a low credit score.  I do not pay my mortgage late.  Yet somehow, I am dealing with an LLC that I'm embarrassed to even mention the name of. 

OTOH, after at least three years of paying by mail, I finally signed up for autopay and they correctly debited my account this morning. 

Oh yeah, yes, I'd have some reservations about paying extra to principal when dealing with this entity.  I'd definitely send the extra payment separately, make sure that it was credited to principal, and check math and dates.  I'd also take copious screen shots. 

I have had nothing but good experiences with the bank that services my mortgage, Chase.  If I want to adjust my payment to pay extra, I just log on and tell them how much extra I want to go to principal.  They have always paid my taxes and insurance on time.  Their website is easy to use.  It even has a tool that shows me that if I add x to my mortgage principal each month (or a one-time payment as another option), when my mortgage will be paid off.

They debit on the day I tell them to.

I guess like most things, it is good until it isn't, but they've been a pleasure to work with.  I truly hate that some of you have had such bad experiences.