8 ms·
Except the loan was paid including all interest for the lifetime of the loan. If you prepaid your mortgage that way, even on purpose, your bank would owe you a
by jmvoodoo 6y ago
Except the loan was paid including all interest for the lifetime of the loan. If you prepaid your mortgage that way, even on purpose, your bank would owe you a good portion of your money back.
- dahfizz 6y agoI don't understand. You're saying if I decided to pay off my mortgage all at once, my bank would "owe" me my payoff check?
- ganoushoreilly 6y agoI think op is implying the difference in non-accrued interest. IE your payment at that point would be all principle, thus negating the loan and incurring over payment.
- sombremesa 6y agoIf you calculate all the money you will put into your mortgage loan over time, add it all up, and write a check for that amount, it will be more that your principal balance because of interest.
- paulmd 6y agoInterest accrues on a monthly basis, so if you pay it off now you won't accrue the interest on an ongoing basis. In other words - over the life of the loan/mortgage you will pay $X in principal and $Y in interest. If you suddenly pay the whole thing back, then $Y becomes much smaller. So if you paid $X + $Y in a lump sum then you would receive some money back, is what they are saying. Because you have overpaid on the interest, because that interest never accrued. (not sure whether in this case Citibank paid the full sum of the principal or expected interest or not, but yes, if you did that on your mortgage then you would be entitled to receive some money back)
- freeone3000 6y agoThat is incorrect - I would actually owe my bank an additional prepayment penalty, according to my mortgage structure.
- hectormalot 6y agoI think gp meant prepayment including all future interest, which would more than cover prepayment fees. High-lvl: prepayment fees is roughly equal to interest owed minus alternative interest options the bank has (eg someone else’s mortgage). Disclaimer: Dutch perspective.
- PascLeRasc 6y agoWhat? Every time I try to learn what a mortgage is it seems more like a scam. The only thing a bank should say to paying more is "thank you".
- loktarogar 6y agoStill cheaper than renting.
- thedanbob 6y agoAs I understand it, the logic is the bank is expecting to make a good deal of money over the life of the loan in interest. Prepaying reduces that profit, so they penalize you to discourage that behavior. Note that not all mortgages have that penalty (mine doesn't).
- VLM 6y agoAs with most financial things it depends on location and time and specific conditions. Generally, its been illegal since 2014 nationwide to have a prepay penalty. In my state its been illegal as long as I've had a mortgage. In some weird but possible conditions its possible post-2014 to have a prepayment fee at the national level for a normal residential mortgage. You'll see all kinds of random dates at the national level. From what I understand the 2010 Dodd-Frank act was the enabling legislation, the new rules came out in 2013, and went into effect in early 2014, but its all the same issue.
- bumby 6y agoIt depends on the conditions of the loan as well. I don’t believe any VA-backed loan can be assessed pre-payment penalties