On Sun, 05 Jun 2011 20:17:45 -0400, Kurt Ullman wrote:

In article ,
JimT wrote:


We just refinanced to a lower rate and term. I plan to have mine paid
off in about 10 years if not sooner (assuming my wife doesn't get that
Lexus she always talking about). I'm always sending extra money on
principle and they never complain. I used to make advanced payments
until I found out that did very little towards increasing the
principle/interest payment ratio. If I dropped back to a normal payment
schedule I'd still would have paid the same interest. Seems unfair but I
guess that's the way the computer processes the payments. I never could
get a straight answer. The customer service people were clueless. I
don't think they train them for these situations.
Clueless is correct. There was always a place on my form to
designate that I was paying extra principle. ALL of that has to go to
principle. Everything I have EVER read says that you save all sorts of
interest (IIRC it cut the total interest I paid by around 40% or so.

Correct. They can only charge interest on the outstanding balance. That
said, they can make it a PITA to pay towards the balance rather than just
build up money in a *very* low yield account. At one time some mortgages
required that payments towards the balance had to be in monthly payment
increments, just to discourage advance payments. I don't believe such is
legal anymore. My mortgages haven't worked that way.

There also may be a pre-payment penalty. These are normally used to recapture
paid (financed) closing costs. There may be a substantial penalty for paying
more than, say, 1/5 of the mortgage in a given year for the first five years
of a mortgage (or some such numbers).

Congrats on paying off your house. I look forward to that feeling!