Financing in New Jersey>Question Details

Sandy, Home Buyer in nct

The following is the text on my mortgage note.

Asked by Sandy, nct Wed Apr 23, 2008

Can someone pl. let me know the meaning of the later part.
Say I decide to prepay the loan say in 1 year with 300K on a loan of 400K , will the 300K first be taken towards the interest remaining on the loan or will it all go towards the principal ?
How does monthly extra payments go say if I add a monthly $200 on top of my monthly mortgage payments , wilt he $200 go towards my principal or interest or part principal and part interest ?
Pl. educate me.
I may make a full Prepayment or partial Prepayments without paying a Prepayment charge. The Note Holder will use my Prep to reduce the amount of Principal that I owe under this Not

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You can reduce your equity by paying it down. I don't see a penalty for doing this based on what you have provided here. Your payment wont go down on a fixed mortgage, only on an interest only....
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0 votes Thank Flag Link Sun Jun 1, 2008
There are many variables on this. Email me directly at or call 908-868-2021 and I can help you.
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0 votes Thank Flag Link Sun Jun 1, 2008
Most mortgages are simple interest. On a regular monthly payment the interest is paid through the date that it is recieved and the balance is applied to principal after the tax and insurance accrual are taken out. This means that if you add a prepayment each month, it is that amount that is subtracted from the principal balance which shortens the life of the mortage. It does this because the interest portion of the future payments is smaller because the balance has been reduced and more of your regular monthly payment gets applied against the mortgage balance. The other portion of your question deals with a completer payoff of the mortgage. On a mortagage the interest is calculated from one payment to the date that the next payment is due. If you wanted to do that you should call the mortgage company and ask for the payoff amount for the date that you intend to make the final payment and they will give you the interest due and the principal due to pay off the loan. The interest portion should only be that amount of interest due since the last payment. Thhis assumes that you do not have a prepayment clause in the mortgage agreement which would list the terms and conditions under that paragraph heading. Feel free to contact me if you would like more informaiton.
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0 votes Thank Flag Link Tue May 27, 2008
It has always been my understanding that your monthly payment whatever it is will pay the interest due for that month, the escrow (if in place) and then the principal, If your normal payment is $2000 a month, the first $2000 of your $300,000 payment would make your regular payment, the remaining 298,000 would be an additional principal payment reducing your outstanding balance. Having said that, I agree with the others that you should contact your servicing company and find out the best way to accomplish the principal reduction.
0 votes Thank Flag Link Thu May 15, 2008

It sounds like you have a standard conventional note with no pre-payment penalty. This means that you can make advance payments to principal without paying a penalty. Some notes stipulate a certain percentage that is allowed to be pre-paid each year without penalty, while others place no such limitation of the borrower.

Should you decide to make a lump sum payment, you will want to contact the servicer of your note (the company to whom you make your payments) and ask them the best way to make certain the total amount of your pre-payment goes to offset the principal balance.

Good Luck!

Trey Bowden
Mortgage Lender
(405) 340-3277
0 votes Thank Flag Link Wed May 14, 2008
I am not a lawyer, and I suggest you take it to a real estate attorney for their legal interpretation.
Sharon Kozinn
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0 votes Thank Flag Link Thu Apr 24, 2008
You specificy on your payment stub/check/on line payment method or wherever, that whatever extra amount you put in is going towards your principal.
0 votes Thank Flag Link Thu Apr 24, 2008
Hi Sandy. You have to specify and allocate the extra payment that you send the mortgage company to go towards the "principal".

Gina Chirico
973-228-1000 ext 132
0 votes Thank Flag Link Thu Apr 24, 2008
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