I received an unusual call from my mortgage company yesterday. They wanted to give me a "friendly reminder" that I had not made my mortgage payment for this month. I've had my mortgage with this company for a little over two years. I've never been "late" on a payment but I do take advantage of the two week grace period every month. Instead of paying on the 1st of the month, I usually wait and schedule an electronic payment to post around the 11th or 12th of the month. Those of you that have a mortgage are probably aware that your mortgage company gives you until the 15th of the month before they consider your payment late. If you make your payment after the 15th of the month, you will usually owe a late fee in addition to your regular payment. Usually, a Iate payment is not reported to the credit bureaus as being late until after you are over 30+ days late. Holding my payment until just before the late payment date allows me to earn a few extra cents in interest on my money.
I was a little upset that they called me about my payment because I've never been late before. I was also ticked because I'd already scheduled the payment last week to post to my account today. I'm pretty sure they are able to see that a payment had already been scheduled. I was upset for a little bit but after thinking about it for awhile, I kinda appreciated the call. I guess with the current rate of foreclosures, they want to make sure they do everything they can to keep another home from being foreclosed on. Actually, it may have been a good idea for them to call just in case I had forgotten to make my payment this month.
Do any of you take advantage of the grace period on your mortgage or do you promptly pay on the 1st?
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I am not sure whether this facility is available in the UK, but if it is, it sounds like a great idea to take advantage of it. Over the 25 year mortgage period those few cents that you save each month could add up.
We actually do the opposite. We pay at least 15 days early each month, so that more of the money goes towards principal than interest. It's worked pretty well for us so far. I am not sure if all banks are like that or not, but that's the way our mortgage works.
We set up an automatic payment of the mortgage for the 1st of the month. Using the grace period is like playing with fire. The "few cents" that you make will all be more than canceled out by one late payment.
I set up our automatic payment for the 5th. Since my paycheck gets deposited on the 1st, I wanted to have a few days leeway in case it was ever late for some reason.
When things were really tight , we used to do this, but I agree with Jonathan, you're playing with fire. Agree also with Kara in that those few cents (especially few these days) are offset by the interest accruing on the mortgage. It's just not as obvious.
Finally, it is a breech of your contract, and whether or not it's reported, they have a record, and will not be inclined to offer you a better financial product.
First of all, it's not a breach of your contract. If it was, believe me, they would be charging you for the error of your ways.
Secondly, most mortgages are simple interest. Paying on the 14th of the month versus paying on the first has NO effect on the interest you pay for the month. Remember, folks, you received an amortization schedule with your mortgage documents. Your principle and interest payments are predetermined so long as you do not make a late payment or overpay your principle.
And just to hazzard a guess - I'm thinking you have a mortgage through Citimortgage. I got two phone calls...
I've been autopaying on the 11th for about ten years on my mortgage. I think I've had two of those polite phone calls in that time, and when the kids on the other end got it explained to them in simple terms that it's not "late" until the 15th, they quietly and politely went away.
I would hazard a guess that you would think its OK to not pay rent until the 15th, despite the first being the due date. It's OK if they don't charge late fees until the 15th? I'm sure many small landlords would "politely" disagree, since they have bills due by the first, too. How about your friend you agreed to pay back; it's OK since there's "no late fee"? Oh, but with big banks, it's OK? Banks have very long memories when it comes to "their" money. You can bet notations such as "consistently 10 days late" will be in their records for future reference.
I do stand corrected re interest, but if I had money on hand, I would NEVER mess with the due date. It's crazy, especially if you use a billpay service. Too many stories of screw ups.
I pay on the 1st every month. It seems like you would only get the benefit of the extra days for that first month that you wait 15 days. Because after that point, you still have a month in between your next payment. Paying on the 13th every month is the same as paying on the 1st every month after that intial 15 day delay of payment. Doesn't seem to be worth it to me.
I don't have a mortgage so I'm no expert on the matter, but if the payment is due on the 1st, I'd pay it on the 1st.
Waiting any longer is taking advantage and regardless of whether or not it's reported to the credit bureau, it still doesn't look good on the bank's in house credit report. Meaning - you are damaging your reputation with your lender.
To address some of the comments, my mortgage is with SunTrust Mortgage and I have numerous local branches in case I need to make a quick payment.
I recently received a similar "friendly reminder" call from my mortgage company too. Like most mortgages (check your closing documents to be sure), our payment is due on the 1st of the month with a free grace period through the 15th.
My wife and I purposely schedule our autopayment to go out on the 5th of every month just to give us some "wiggle" room in case one of our deposits doesn't make it in on time. (We're entrepreneurs and typically pay ourselves once a month.)
In any case, it is a little frustrating to get a "reminder" call when you're not doing anything wrong. I suppose the mortgage companies are doing all they can to maintain cash flow - I'd probably do the same if I were in their shoes too.
I have a virtual envelope (savings acctO at an e-Bank for my mortgage payment. I fund it about a month early. The only thing that goes into the acct is mortgage payment. The only people with access to that acct is the mortgage company. It gets the 3.whatver% interest for about a month. If I get any extra cash, I throw it in that acct. The Friday before the 1st (due the first), I log on to mortgage company web site and ask them to pull the cash. They post it that day to the acct. It takes them until Tueday before the cash disappears from that savings acct. So I know for sure I'm double dipping the interest 1 weekend a month. I can never seem to get a straight answer on the simple interest vs. pre-computed interest. What gets me is Citi-mortgage charges $10 to do web pay unless its the 1st thru 8th of the month...
The due date reads ##/01...not ##/15. You pay late each and every month. When I bought my second house, the new mortgage company said "I see you pay your mortgage an average of 7 days early. That'll make this much easier." I got a better rate & faster approval. You'll get a scowl & higher interst rate. You'll never notice because you won't know any better. Next time you need a mortgage or a loan, you'll never know that you're paying way more than me for the same amount. What if your company never paid you on time? How would that work out for you? Pull your credit report & check out how thats been affecting it.