Posted by MarkB_MI on October 08, 2015 at 18:05:34 from (70.194.5.199):
A couple of months ago I decided to pay off about half the principal on one of our rentals. The payment coupon didn't have a place to specify how the overpayment was to be applied, so I assumed all of the overpayment would go against the principal.
Coincidentally about this time the mortgage company stops sending monthly statements and sends us a bunch of payment coupons. I didn't like this, since we can't see what's going on, so I requested them to switch me back to monthly statements. When I opened my first statement I got a shock: the attached coupon was for December! Then when I looked closer, I saw that the mortgage company had pulled a fast one.
Instead of simply applying the full overpayment against the principal, they took two additional payments out and treated them as monthly payments made in advance. So about $300 went into escrow, even though there was already plenty of money in the escrow account. And they charged about $400 in interest, even though no interest actually accrued! Not only that, but because they charged interest on the principal PRIOR to the prepayment, they got about double the interest which would have been due HAD any interest accrued.
I just sent them a nasty letter telling them to make it right. I was really surprised they tried to pull a fast one, but apparently this is a pretty common scam. Be very careful to check your mortgage statements if you make a pre-payment. It seems most people don't.
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