Mortgage company won’t accept my weekly payments, but I have no prepayment clause. Is this legal?

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My mortgage is a traditional 30-year fixed, with no prepayment clause, and was just sold to another mortgage company (the one in question). I recently setup my personal bank account to autopay (EFT) 1/3 of my mortgage bill every week. I did this to reduce accruing interest, and pay a little extra to principle each month. My mortgage company called and said they will not apply my partial payments – they put the funds into a ‘Suspense’ account until the value of partial payments reaches the monthly statement amount.

BUT (here’s the kicker), if I sign up for the mortgage company’s own accelerated pay schedule they will let me make bi-weekly payments.

I thought that if one has a loan, the lessor has to accept and APPLY funds they receive (unless there is a prepay clause). Are they allowed to hold my funds like this and not apply them to the balance? Does this fall under some usury law?

Any mortgage brokers out there? Help!!!

Thanks in advance!

I am in my last year of college and am not required to start paying off my student loans yet. But I was wondering how exactly paying them off works. I have all the money saved up to pay my loans (thanks Uncle Duffy!) but I wasnt quite sure if there was an option to pay it all off immediately or if there was some prepayment penalty clause, like with mortgages. Ive never had a loan before so I dont really know how things work
my loans are subsidized so I dont have to worry about paying the interest at the moment

20 Comments
  1. Reply
    ontopofoldsmokie
    January 24, 2011 at 11:53 am

    A mortgage payment is one of the few payments where they will not accept partial payments. They will, as you have learned, suspend it or send it back. You can still do this. Just indicate extra funds each month to go to principal. Do not just make an extra payment as they will apply it to interest and escrow as well as the principal. You want that extra amount to only go to principal. If their biweekly payment plan is free then you might consider going that way. More than likely they will charge you for allowing you to use their plan-in essence a prepayment penalty. Go figure.

    • Reply
      Mr R
      June 1, 2011 at 3:56 pm

      there are 2 type of people out there, those that are willing to pay a dollar to get 2 dollars back and those who always want something for nothing

  2. Reply
    Mary G
    January 24, 2011 at 12:24 pm

    If it’s in the fine print, that’s it. Are you paid ahead? Then maybe they will accept weekly payments, but I still doubt it. They will think, too much paperwork, too much trouble. Worst thing that can happen is the biweekly payments. Still really helps.

    • Reply
      Mr R
      June 1, 2011 at 3:37 pm

      you are never “paid ahead” on a mortgage, your either current or your principal gets paid down, making a payment on the due date is not paid ahead, it just means your current.

  3. Reply
    es
    January 24, 2011 at 1:00 pm

    I am not a mortgage broker, I’m a realtor, but I think I can help you. Rather than make your payments weekly, open your own savings account and save your extra payments yourself. Then, make your additional payment when you have reached the monthly amount. Make sure your payment instructions specifically say ” apply this payment to principal, first”. Otherwise, they do not have to do it–and can let it go all towards interest-which doesn’t help you as much since the more principal you pay down, the less your interest charges will be. Since they’ve told you they won’t take your weekly payments, you might as well make a little interest for yourself, in your own account.It isn’t worth the fight- they have to recalculate your credits and balances constantly if you pay weekly- their system isn’t set up to do that. Hope that helps!

  4. Reply
    D
    January 24, 2011 at 1:41 pm

    You need to consult an attorney. It depends on your contract. I had a similar problem only in my case I sent in two payments at month’s end. The customer service rep and her supervisor were very nasty until I consulted an attorney and he told me that the mortgage co. couldn’t refuse my payments as I was sending them in. You would be wise to consult an attorney and pay the small fee. You don’t want to mess up your mortage payments or your credit!

    • Reply
      Mr R
      June 1, 2011 at 3:44 pm

      this is partially true, if you send in 2 full payments at months end, the lender can apply one and hold the other in suspense UNLESS you direct them tho apply it to pricipal every month, and if you are sending 2 half payments per month, the lender DOES NOT have to accept them, because CONTACTUALLY you LEGALLY BINDED and OBLIGATED yourself to make a MONTHLY payment, not a SEMI-MONTHLY payment, and sorry, but in a mortgage contract 2 HALVES does NOT make a whole. your attorney legal opinion is a MOOT point, unless your attorney specializes in MORTGAGE CONTRACTS. always remember: ITS NOT YOUR HOUSE, the bank OWNS it, and if they want ONE payment per month, that what they WILL get.

      i_am_bond007_2003@yahoo.com

  5. Reply
    DJ B
    January 24, 2011 at 2:37 pm

    Unless it specifically states in your mortgage papers that they will not accept partial payments, I would call them on it. I understand the loan has been sold, but they must adher to the original loan docs you signed. If you had signed new docs with them, then those would be in first place.

    My other suggestion is to find another loan company and negotiate a loan program to suit your financial needs.

    • Reply
      Mr R
      June 1, 2011 at 3:47 pm

      WRONG!!!!, you can only go by what the contracts says you CAN do, the mortgage contract DOES NOT have to say it WILL NOT, it only has to say IT WILL.

  6. Reply
    wanting baby3
    January 24, 2011 at 3:27 pm

    Some systems are not set up to accept anything more than a principal reduction payment unless you are making the payment in full. You should put those payments into a seperate savings account that will earn you interest on your money and then make one payment each month, because if you let the funds set in the “suspense” account your letting the bank use your money and you gain nothing.

  7. Reply
    CommonCents
    January 24, 2011 at 4:15 pm

    Great question, unfortunately traditional mortgages with a 15 day grace period, are not based on daily interest..

    Depending on your financial situation, paying down the mortgage may not be the wisest thing to do…
    Yes you reduce your debt, but you also lose the access to the extra money and the interest that you could be earning on it.

    I know people that have lowered their mortgage balance like you, but are in a financial bind today because they did this and have no extra cash in the bank now.

    Consider putting the funds aside in a FDIC insured account that DOES pay daily interest.

    If you do want to pay extra principal, it is best to pay it WITH your regular payment, with the same check.
    Interest will get credited first, and the balance will go to principal. (If you have an escrow account funds will go there after interest is credited)
    There is always a place with your payment that you can add the extra principal.
    They don’t accept partial payments.

    Most mortgages are due on the 1st and late on the 16th.
    Because of the grace period, you are not paying down principal any faster if you pay on the 1st or the 15th…
    You are paying the interest that is due for the previous month.

    By the end of the month, they will credit your extra principal, and the interest that you owe on the 1st will be lower than the previous month.

    By sending multiple payments in a month or writing separate checks, there is more to go wrong.

    Mortgage loans are amortized monthly differently than “consumer loans” which are often daily average interest.

    HELOCS=Home Equity Lines of Credit ARE based on average daily balance….(usually 2nds)

    Schedule ONE payment a month by the 15th, and add to that one monthly payment anytime you want to pay extra.
    Make sense ??

    • Reply
      Mr R
      June 1, 2011 at 3:52 pm

      Interest gets charged on your PAYMENT from the due date to the end of the grace period, NEVER assume that the grace period changes the due date, the due date is the FIRST, if YOU CHOOSE to pay in the grace period, you ARE being charged interest on the PAYMENT. but NOT the loan balance. of course we are talking pennies, but if person A makes the payment on the due date for 10 years in a row, they will be AHEAD of person B who does it on the 15th, how much depends on the loan balance and iterest rate.

  8. Reply
    achievablemortgages
    January 24, 2011 at 4:59 pm

    It is legal. Most lenders will not accept partial payments unless it is set up through their company. What you can do to pay the loan off quicker is still have the money taken out weekly, set it aside in your bank account, and have your bank make the monthly payment plus any additional leftover to reduce the principal balance on the note.

    • Reply
      Mr R
      June 1, 2011 at 3:54 pm

      what you are referring to is NOT the same. you are talking about making a MONTHLY payment versus sending in weekly or bi-weekly payments

  9. Reply
    Nick P
    January 24, 2011 at 5:09 pm

    I believe you can pay it all back if you wish without penalty. But remember it is at very low interest and you can earn more leaving it in a bank and making a profit (if your uncle is ok with that). Also you will have the cash for an emergency or want to start a business, buy a house etc.

  10. Reply
    Ricky H
    January 24, 2011 at 5:24 pm

    best I can remember, you can pay off the full amount with no penalties.

  11. Reply
    ubar l
    January 24, 2011 at 6:17 pm

    Call your Student Loan Company and ask them if there is a penalty, but I have never heard of one. If you have the money to pay them off I think you can do that now before you graduate. That way it saves some interest.

  12. Reply
    superstar_81882
    January 24, 2011 at 6:19 pm

    No, there are no prepayment penalties when paying in full a federal Stafford student loan. It is wise to do if you have the money and it will not create a financial burden because this means you will pay far less over time. The amount you would pay in interest on the loans is not worth the amount the money may accrue in interest if you let it sit in the bank. Furthermore, you will positively impact your credit history because payment in full shows your credit-worthiness.

    Also, you can pay it off even before you actually enter repayment because your lender must always accept any payments made toward your loan. So if you’d like to pay it off now, you may do so without ever having a single penny of interest applied.

  13. Reply
    MWG
    December 6, 2012 at 4:05 pm

    I was pretty upset when I learned my lending back would not apply partial payments imediately. Instead of making weekly or bi-weekly payments, you could pay the monthly mortgage plus 1/12th of a mortgage payment. This way the additional payment at years end is spread over the year and the extra 1/12th lowers principal and accrued interest faster.

  14. Reply
    Bill R
    February 28, 2013 at 11:41 am

    I found this site because I have the same issue with my mortgage co, Wells Fargo. I am paying half monthly payments every two weeks. They hold the first then post full payment when second payment is transferred from checking. Benefit of paying 13 monthly payments a year.
    At current rate I will be early-70’s at payoff of the 15 year note.
    I have heard and noted in discussion that pay off is not always the best path; that the extra cash should be saved.
    Is there a calculation one can make to determine under what circumstances that pay-off vs savings is the better.
    I would really like to have this paid off by the time I’m 70
    Thank you

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