Reply to Courtesy Calls from Wells Fargo aka Shitheads

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]You pay your mortgage interest arrears. So when you make your payment on the 1st of each month, you are paying the previous month's interest. That is why the bank is eager to get their payments. They can not add interest during the grace period.

The 'bimonthly' payment option is commonly a bi-weekly payment option. You pay an extra month each year, so it accelerates the payoff. It is a pseudo bi-weekly plan because the bank still only calculates the principle/interest once a month. Not sure how many banks offer true bi-weekly or bi-monthly plans (calculates every 14 or 15 days). [/quote]

You are not entirely correct. Yes, you pay interest in arrears. On the first of the month, you would pay the interest generated on the previous payment period(Let's say it was 30 days). The remainder of your payment goes to the principal. If you pay on the 15th, interest still accrues on the entire amount from the 1st through the 15th, just as it would if you paid on the 1st. The difference is that your payment has not been applied, so the principal has not been reduced by the amount of your payment. Over the course of years, that additional amount will add up, increasing the total cost of the loan.

This may not be true for every loan, but if it is a simple interest loan, the most common type, than that is the way it operates. The "grace period" has no affect on how the interest accrues, it only affects when late fees are applied. Normal interest is not a late fee.

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Then why doesn't the monthly payment amount ever change (apart from escrow and tax changes)? You'd think that people who always pay on the 1st would have lower monthly payments than people who pay on the 15th, for the same initial principal. But you don't see this happen.[/quote]

It doesnt affect your payment, but will affect the payoff date.  The more interest you accrue the longer it will take to pay off the loan (could be longer than the loan term).[/quote]

If interest is calculated monthly, there would be no difference in payoff dates. [/quote]

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