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Amortization Term

Posted on: 31st Mar, 2004 09:31 pm
The time period required to completely repay the mortgage loan is referred to as amortization term. It is the time over which the principal amount would be repaid on the basis of periodic installments with interest being paid on the outstanding balance. This is usually expressed as a number of months. Thus, a 30 year fixed rate mortgage has an amortization term of 360 months. Commonly mortgages are amortized over 15 or 30 years i.e. common amortization terms are 180 months or 360 months.

Mortgages are possibly the longest loan to be taken i.e. they 'spread' over the longest period while getting repaid. Mortgages can continue to even 30 years. In general, the shorter the amortization term the lesser is the interest to be paid back. This is the reason why people prefer a shorter amortization term. However, mere opting for shorter amortization periods will not be sufficient. One has to spend more money at each installment in case a shorter repayment period is set. So, one's earnings and financial situation also need to be considered.

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Thank you for your time and attention to this matter.

I have four related questions relative to my amortized mortgage payments.
1. Does the original amortization schedule for a mortgage home loan transfer when another company purchases the loan?
2. Per Federal and/or Missouri law, can the purchasing company alter the allocation of principal and interest from the original loan amortization schedule?
3. Finally, can the new company add an additional per diem charge, increasing their interest portion of the payment, when a payment received is after the due date, yet before the late date, when late charges apply?

Example: Loan due 8-1, payment received 8-2; the company allocated an additional $.04 to interest by reducing the principal portion. (Note: late charges added after 15th day.)

Answers to the above questions will help resolve a dispute.

My situation is as follows:
I re-financed my home in May 2008, received an amortization schedule at closing, and use it to make my usual additional principal payments. I usually make one PIE payment, and two additional principal payments.

Because my pension check and my mortgage were both due on the first of the month, I requested the loan due date be changed to the third. They declined, advising I had 15 days grace period to make my payment on time.

Countrywide Bank purchased my loan in July 2008. They received and correctly allocated my first two monthly payments, including the two principal payments included with each payment. These two monthly constituted the amortized payments #1 thru #6.

My 3rd payment, in August, was the monthly PIE payment (scheduled #7) and two additional principal payments #8 and p #9. However, my statement disclosed Countrywide Bank took an additional $ 0.04 interest from payment #7, by deducting it from my #7 principal payment.

I complained it is illegal to change the terms of the original amortization schedule. They replied that the additional principal payments changed the scheduled interest, and the interest had to be re-calculated.
I restated my complaint; they answered because my payment was not received on or before the 1st, they add per diem percentages, altering the interest/ principal allotment.
I re-stated my complaint, and requested a copy of my loan agreement allowing this practice, to include the “Truth in Lending” page.

(Note: my bank sent my payment on the 7/29/08, Countrywide Bank received it on 8/1/08, funds withdrawn on 8-1-08, and the payment applied on 8-1-08.
Posted on: 18th Sep, 2008 05:16 pm
When a mortgage loan is transferred to another company, the original amortization schedule applies. However, the new servicer may change the payment terms but he should inform you through a notice.

The servicing company which purchased the loan can charge late fees if payment is made after the due date. Though the company has given a grace period, yet they can charge extra fees just because the payment hasn't been made at the due date.

The servicing company can alter allocation of principal and interest if they are willing to charge extra fees due to payment being made after the due date. However, they should have informed you that they'll charge extra.
Posted on: 20th Sep, 2008 10:14 am
I want to know do I charge interest for every day that they are late, This is a normal amortization and it has no grace period.
Posted on: 28th Feb, 2009 09:27 am
Hi JoAnnn,

As far as I know, penalty can be levied if there is a late payment. The penalty charges will be based on the outstanding amount due on the due date. However, I would suggest you to contact your lender and get the correct information.

Thanks.
Posted on: 02nd Mar, 2009 12:59 am
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