Tuesday, March 04, 2008

Additional Payments to Mortgage Principal

I pre-paid some of my mortgage principal last week-- unfortunately, I didn't do it on purpose!

My payment due March 1 was the first one with a new, higher escrow amount due to the ongoing tax abatement confusion. I entered all of this correctly in Quicken, but I forgot to change the auto-pay amount I have set up to go out of my checking account! I was looking at my account online and saw that the amount debited didn't match my Quicken records. I realized what had happened and immediately thought I'd better send another payment to make up the balance. So I sent the missing $370 by an immediate electronic payment.

Can you say "dumb and dumber?"

AFTER doing this, I logged onto the CitiMortgage website to look at the status of things. I'd never actually used their site before, so I enrolled right then. Nice site, easy to get all your info: it only took me seconds to discover that because the amount of my original payment didn't match my official amount due, and didn't arrive with a payment coupon in the mail designating how it was to be applied, they considered the whole thing to be an additional payment toward the principal, instead of applying it first to the interest, then principal, then tax escrow. And of course this is exactly what will happen with the additional $370 too! So in order to fix things, I went back to my checking account and sent a third payment for the exact amount that was originally due on my mortgage statement. Let's hope they know what to do with it this time!! And let's hope it's close enough to the due date that they don't charge me a late fee.

Oh well. I was lucky enough to have the cash on hand to pay extra on the mortgage this month. I'd been thinking I might not make any extra payments towards my principal just yet since my interest rate is pretty low vs. potential investment returns, and I'm still rebuilding my liquid savings after buying the condo. But I figured it would eventually be good to pre-pay a little here and there, as I really like the idea of paying less interest over the life of the loan. So I was really waffling about it. Isn't it nice when decisions are made for you, even when what makes the decision is your own stupidity???


Anonymous said...

Its a good thing you had the extra cash on hand to virtually make 2 mortgage payments this month. If you wouldnt of had the extra payment most lenders would say to bad and then you would start to get hit with late fees and hits to your credit.

As far as being a couple of days late on the "full" amount, most lenders have a 15 day grace period before any late fees are charged. You should be in the clear.

Also, bi-weekly payments are a good way to make an extra payment a year on your mortgage. If interested call your lender and they can tell you more about it and get you set up.

Anonymous said...

I've been there... Same type of thing as you, something where they adjusted the amount needed in escrow so my payment got all switched up and they sent me two bills in one month.

I paid them both worried about being late, and it hurt at the time, but since then I've always been a month ahead.

One of the better "mistakes" I've made!

Anonymous said...

Bronx Chica...OMG was you reading my mind?!..lol... I had made a recent mistake 2 days ago..I brought an unlimited pass instead of a pay-per-ride...yes -$5 from the purchase and it ends this weekend...what a smart purchase

Noel Larson said...

A "Doh" moment...but good timing!