The two easiest ways to put more money toward a mortgage are to set up automatic payments from a bank account or use the lender's website.
|There are a number of ways to accomplish a mortgage payoff|
Automatic payments can be made monthly, bimonthly or biweekly to match the borrower's employment pay periods, if that's the borrower's choice.
Loan must be currentTechnically, what most homeowners think of as an extra payment isn't really a payment because it's not one of the scheduled installments. Rather, it's extra money applied to principal, called "curtailment" in bank parlance.
They're not really making another payment. They're sending in funds to pay down the principal.
Borrowers generally can apply extra funds to principal as long as their loan is current, meaning all the scheduled payments are up to date.
If a prior payment is late or has been missed or the loan is delinquent, the extra funds must be applied to make up that difference before additional principal can be paid.
The same isn't true for an escrow or impound account used for property taxes and homeowners insurance, however. A shortfall there can be paid in a lump sum or spread over a number of future payments, but it needn't be made up in full before additional sums can be applied to principal.
Clear instructionsBorrowers who want to send in extra money don't need to call the lender or loan servicer ahead of time.
There's really no reason to call and say, 'Hey, I'm going to do this.
That said, communication is crucial to ensure the additional funds are applied to principal and not to the next scheduled payment. Clear instructions are especially important if the borrower's intention might not be clear.
As long as you have a way of telling us either via a coupon or online or through the branch, you can be assured it will be done correctly. It's when you just send in a check and don't say what to do that issues can arise. We're doing our best to guess what you wanted.
Two situations likely to cause confusion: The borrower wants to pay an extra amount exactly equal to the scheduled payment, or the borrower wants to pay an extra amount right before the next scheduled payment is due.
Curtailment limitsBorrowers who want to apply a relative large extra sum to their principal -- perhaps because they've received an inheritance, bonus or other windfall -- can do so, but a few cautions are in order. Some lenders limit the amount that can be paid online to protect against fraud or a typographical error. Wells Fargo, for instance, caps online principal curtailment to $99,999 per transaction, in part to guard against customers accidentally trying to pay $100,000 instead of $10,000.
Another caveat is that the additional money can't equal or exceed the loan balance, according to Hugh Suhr, a spokesman for SunTrust Mortgage in Atlanta. A loan payoff figure is a moving target due to interest calculations, and thus it's best discussed with the bank in advance.
No money backHere's one more tip: Borrowers who send in extra money by mistake might be able to reverse that error if they contact the lender with haste. But extra money sent in long ago generally can't be reapplied to current or future payments if, say, financial difficulties arise.
If it's within 30 days, it's typically not an issue. But if someone is coming back and asking for the last five years of curtailment, the answer is going to be 'no.'