Submitted by gundamstar1 t3_z5oaiu in personalfinance
My mortgage is with Wells Fargo and normally, the bill says the due date is on the 1st of the month. But a rep recently told me that as long as I pay before the 14th, I won't get a late charge. This got me thinking: is there any downsides to not paying until the 13th or 14th? Will get additional interest charges on those 13 or 14 days?
They will show to WF as slow payments and probably make them less willing to lend you more money or work with you if you have issues with your mortgage. It also gives you zero cushion if something goes wrong or is delayed with your payments.
Yes interest will be accruing.
The downside is if something happens, you have less time to fix the screw up.
Is there a reason you want to take that risk?
So this means, if I always pay on the 14th, I would be paying more interest over the lifetime of the loan, compared to if I paid on the 1st?
Interest is calculated on daily outstanding balance. So you’ll accrue more interest. Inversely if you pay every two weeks you shave some interest off. Though you have to make sure they do it as some places will just hold the payment.
Interesting - did not know about this. Will check if WF holds or not.
I can spend more now on BF deals, say, and pay my mortgage when my next paycheck comes in...
If you need to delay your mortgage payment to buy things on Black Friday, the last thing you should be doing is buying things on Black Friday.
No this is false
It’ll be fine to pay on the 13th or 14th. Some people on here goody 2 shoes with their holier than thou advice. You’re an adult and know how to move some things around to get what you need done without being hurt financially in the long run. Enjoy black friday and your home:)
The reason that mortgage, property tax, HOA fees, etc. are "due on 1st and delinquent after XXth" is they don't want to be involved with your cashflow issues such as getting paid on the 1st but still waiting for paycheck to clear, ACH transfer times, post office delays, etc. Feel free to take advantage of their generosity. I personally delay payments to the same day as my credit cards' due date so I only have to watch my checking account one day per month. But you aren't getting much out of it.
Remember you are paying a mortgage every month for like, 15-30 years. You are only getting 13 extra days worth of interest once on the first time you switch from paying on the 1st to paying on the 14th. All of your subsequent payments are still one month apart.
It's like getting direct deposit 2 days early. You only enjoy the benefit once. All subsequent direct deposits are still one pay period apart.
It is the personal finance subreddit after all. Where people are learning to budget, save, and get out of debt. Delaying a mortgage payment to buy 'wants' is not a good idea unless you, at least, have an emergency fund. If you have car trouble in the next 2 weeks and you then have to decide between getting to work or missing a mortgage payment this would be a massive regret.
Absolutely 100% false for mortgages
Mortgages typically calculate interest monthly.
Your last points are only true if you have a simple interest note, which the majority of mortgages are not. Most mortgages you pay the same amount of interest no matter when you pay it, except at payoff. The only thing that changes that is contributing additional to principal. The calculation for interest paid with each monthly payment is simply rate times UPB divided by 12.
It’s amazing that this is said almost every time someone talks about mortgages and interest. The vast majority of mortgages are not simple interest - I think people get used to it being that way with car loans and then assume it’s the same with their mortgage.
Right. Even my biweekly payment does not save interest because I pay half the balance two weeks early every month. It saves interest because I make two extra payments per year and pay off the whole thing six years early.
> Your last points are only true if you have a simple interest note
I was talking about interest in your HYSA for parking your money for the extra 13 days. You don't pay extra interest to mortgage for delaying payment to 14th.
Ah, totally missed that, my bad.
I’ve always paid my mortgage between the 1st and 15th, every single month I’ve owned a home. I’ve never once been charged any fees.
Yeah… I’d skip those BF deals if I were you. If your financial situation was better, you’d have a credit card to pay for the BF items and pay that off with your next paycheck and have your mortgage paid on the 1st like normal. So you probably can’t afford these extra BF items…
My understanding is that the April 1 payment is paying for May. So even if you have it there by April 13th, that is still two weeks before what the payment is paying for.
How close can you put your hand to a fire before it burns?
The downside is that you are playing with fire and any mistake can cause a late payment. In the comments you say you want to blow money on black friday deals and pay the mortgage with your next paycheck.
This type of thinking leads to destruction.
You pay interest on those like extra 14days it’s like a couple cents or dollars it’s not a lot but it does accumulate. Within the 15 days. I use to work for mr Cooper. The risk you run is let’s say your payment does go through it is a late charge. Also you don’t seem to find out till a couple days after.
If you’re living paycheck to paycheck with a mortgage then it’s probably a good idea to tone down the Black Friday shopping.
“Note A bimonthly mortgage may also save you some interest if your mid-month payment is applied to your principal when the lender receives it. However, most lenders offer bimonthly mortgages as a tool of convenience and don’t apply your payments until the end of the month—which means a bimonthly mortgage typically doesn’t lead to interest savings.”
https://www.thebalancemoney.com/what-is-a-bimonthly-mortgage-5210262
Depends on the lender.
Not sure what country you’re from but FYI the vast majority of traditional American mortgages do not accrue interest monthly at this time. Most often, at the point the mortgage is closed, the entire payment schedule including principal and interest is dictated at that time. You’re paying off more principal and less interest every month.
This isn't true everywhere, which is most likely the cause why it gets brought up.
Canada is mostly simple interest mortgages.
4 properties, 7 mortgages (inc refi and HELOC) and probably 20 servicers. Haven’t found a lender that applies payment mid month.
If the taxes are held in escrow then the mortgage might go up by a small amount each year since the account is lower than expected because of the delayed deposits. But it’s not going to be a huge amount.
I have Wells Fargo and I pay around the 14th most months, never had a problem. Especially if paying online there really isn't a downside, they can see if you've scheduled it.
No issues. I pay via automatic payment system and I give myself a few business days leeway in case of any issues. So, in your case, I might set auto payment by 10th of the month.
I have a similar deal. When setting up an auto pay they gave me an option of the day anytime between the first and fourteenth. The one advantage I’ve had with the earlier days was the time I just plain forgot to move enough money to that account which triggered an email giving me time to correct that and them a chance to repeat the auto pay without a late payment.
That’s one way too fast track financial ruin and homelessness.
I did. I’d pay extra mid monthly & confirmed with them it would reduce the principal & the interest calculated from that day.
Mortgages are no usually simple interest loans, doesn't matter if you pay 10 days early or 10 days late, the interest is based on the due date not the date you pay.
Standard practice and no additional interest. As others commented, it's to help you. They just don't typically tell you you have until the XX (usually 15th of month). It's a "grace period."
[removed]
That must be a Jeff Bezos or Sam Walton throwaway account 😜
[removed]
For safety reasons, always verify phone numbers provided in comments on an official website before calling. That includes toll-free numbers!
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.
I’m WAY to paranoid to wait that long. I pay mine a month early that way if anything happens I have 4 weeks to fix it. I pay all my bills on time, but the mortgage is the one that I absolutely don’t mess around with.
We always take advantage of the “free” grace period. My mortgage company gives me up to the 16th. So, we have auto payments set up to take it out on the 16th of each month. Never have we been hit with late fees. At times, it still takes another 2-5 days for the pay to get credited, but we never get late fees because it was paid on the 16th. 👍
While it might look that way, the interest is recalculated at month end on most mortgages in the US. The amortization schedule is set at the beginning based on the MINIMUM payment expected to align with the term of the note. This allows them to charge correct interest on the note regardless of payment behavior (over or under paying changes interest owed). This is why overpaying is advisable, it reduces the total interest you'll pay over the life of the loan.
We are saying different things. If you pay EXTRA, yes, it will reduce your principal and interest. If you simply pay EARLY, it will not.
Well an extra payment is an “early payment”. But I understand that some institutions won’t apply an early payment to reduced outstanding Principal.
Fun fact - in Australia they have what they call “Mortgage Offset” accounts. Basically it’s like a savings account, but instead of earning interest it is offset against the outstanding Principal of your mortgage on daily interest calculations. Thereby you “earn”the interest rate of your mortgage. I was very surprised the US doesn’t have these. They’re great because you can almost pay off your mortgage but still pull the funds out instantly if you need them.
It would make sense if you had assets you wanted to buy. Those bf deals, will you sell them to make more money? That could make sense
As a previous loan originator for WF you may not get a late charge but if it’s payed late they do see that and it can impact your ability to qualify for future loans or refinance in the future if you are consistently paying late.
Actually as a previous loan originator for Wells this is true don’t know why it’s being downvoted.
None of that is true. I work in the industry..stop giving out misinformation..there is no "slow pay" on credit reports. The mortgage is due between the 1st and 15th. Simple as that. And everyone keeps saying pay on the first in case there's a mistake. There's no way to make a mistake unless you're mailing a check like a dinosaur.
What a terrifying comment to read
WF had my mortgage for a little while, then they sold it to someone else. I've had four different servicers, but at least my current one doesn't completely suck.
We just autopay it on the first. What is your upside in paying a few days after?
If you got the just pay it. Why even bother to hold back a few days
Due dates must be friendly little suggestions then. Just pay whenever u want. Mortgage companies don't care. 🦖
[deleted] t1_ixx5cs3 wrote
[deleted]