GDG mortgages....someone help me prove my point.

[WRL]

Here is the situation:

$500,000 mortgage at 6.25% over 30 years (360 months).

Payment due on the 1st of the month. If the payment is not paid on the first (lets say the people pay on the 15th) how much additional interest is paid each day they are late.

WRL

[Sean H]

How many years into the mortgage are we? If it was the first payment of the 360, they would only be paying $474 in principle and $2604 in interest. So the only difference would be that they would have to pay interest on the $474 for how ever many days they are late. The difference in the interest paid the next month is only $3 ($2601 compared to $2604), so even if you wait until the next month to pay, the additional amount of interest paid would be $3 (you still have to pay that months payment as well).

[WRL]

How many years into the mortgage are we? If it was the first payment of the 360, they would only be paying $474 in principle and $2604 in interest. So the only difference would be that they would have to pay interest on the $474 for how ever many days they are late. The difference in the interest paid the next month is only $3 ($2601 compared to $2604), so even if you wait until the next month to pay, the additional amount of interest paid would be $3 (you still have to pay that months payment as well).

Would they not still have to pay interest on the now accrued interest?

WRL

[Lesa Cozens Dauphin]

It depends on how the loan paperwork was drawn up. And how late they are. Paying interest on the interest creates all sorts of issues with the IRS and how you account for it.

lesa c

[Sean H]

I'm not sure. Even if you did, then for the whole month it would still be less than $20.

[blakegober]

normally there is a 10 day "grace" period. You are still considered late after the first day of the month. But there are no adverse affects until the 10th. A late fee would be assessed on the 11th, which is normally 5% of the total payment amount. That is a one time fee for the month and that is the only late fee you will get. Everday after the 10th that you pay the per diem interest you pay starting the 11th is calculated at 6.25% of the outstanding principle balance. For Example:

say you owe 500,000 on the principle of the loan, and your first payment is due May 1st, that means your daily interest in dollars and cents is $86.80 (roughly) ,everyday you accrue this much in interest.

If the person made their payment on June 1st, as required their daily rate is recalculated on the new principle balance of $499,525.58, their new per diem is $86.72

this means that the payment due in June lowers the per diem by only $0.08. So if you paid on the 15th you would owe 5% of the payment amount as a late fee ($153.92) and you cost your self about $1.20 in interest b/c you have to pay at the per diem rate of the month of May. Hope that made sense, its hard to explain in writing. I am a commerical loan officer and that is they way a commercial loan would work, I think a residiential mortgage should be about the same. NOne of that takes in to account Tax and Insurance if they are setup for escrow.

[WRL]

ok thanks.....that answers my question.

WRL

[tshuntin]

Lee, did you win the bet?

[J Hoggatt]

--------------------------------------------------------------------------------

If it is a home mortgage- 99.9% of them

Payment due on the 1st - late on the 16th.
no late fees or penalties for 15 days.
But interest still accrues on a 360/360 basis for mortgages.


FYI:
3 types of Interest Method Calc.:

1. Exact - 365/365 ( most consumer type credit - car, boats etc)
2. Mortgage 360/360 ( home loan etc..)
3. Banker Interest (commercial lending) 360/365

Haven't put a FC of AFC on a dog - but-----Now you are playing MY GAME.

[DarrinGreene]

A mortgage is a simple interest loan. The answer to your question is $0 as long as it's paid by the next payment date.

You will run into a fee at 15 days 99.9% of the time but there is no daily interest accrual or compounding on a simple interest loan.


If you go past the next payment date, I believe the interest from teh previous period would be added on to your principal balance and thus you would compund monthly, however I'm not even sure that is the case.

The only time per diem interest applies on a mortgage is if you're paying it off in full mid month.

I spent 5 yrs in mtg and now do unsecured lines with daily compound interest. They are two completely different animals.