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Path: utzoo!watmath!clyde!burl!ulysses!allegra!alice!ark
From: ark@alice.UucP (Andrew Koenig)
Newsgroups: net.invest
Subject: Re: The 3% rule
Message-ID: <4984@alice.uUCp>
Date: Sun, 16-Feb-86 10:31:54 EST
Article-I.D.: alice.4984
Posted: Sun Feb 16 10:31:54 1986
Date-Received: Mon, 17-Feb-86 05:41:20 EST
References: <184@milo.UUCP>
Organization: Bell Labs, Murray Hill
Lines: 39

> I'm confused. I thought mortgage payments were for the previous month.  So Jan 1
> would cover December, Feb 1 would cover January, and so on.  If you
> refinanced your house on say, Feb 15, at that time you would pay 
> interest for the rest of the month (or until March 4 in your case).  Then
> the next payment wouldn't be due until April 4, and it would cover interest
> from March 4 to April 4.  On April 4 an all too small amount would be deducted
> from your principal, and interest would begin accruing on that new amount.
> That's the way it works around here anyway.  Who floated your
> mortgage, the Mafia?  If not, recheck your paperwork; you may be in
> for a pleasant surprise.

No, it depends on the details.

Some lenders want all payments due on the first of the month,
so if your loan starts in the middle of the month then you pay
the interest until the end of that month in advance.

For example, when we first bought the house, we closed on January 6.
At the closing, therefore, we had to pay in advance the interest on the
loan from January 6 to January 31.  There was then no mortgage payment
at all due on February 1; the first actual payment was March 1
and the last payment would have been due February 1, 29 years and
11 months later.

When we refinanced, we got the loan approved on February 4 and picked
up the check February 10.  Therefore, in effect we made the normal
mortgage payment on February 1, then on February 11 we paid off the
remaining principal plus interest from February 1 to February 11.
Our first payment on the new mortgage will be due March 4, and will
include interest from February 10 through March 4, plus some principal.

Note my hedging "in effect."  Since mortgage payments on the old loan
weren't late until the 16th, we actually sent them a single check to
cover the mortgage payment that was due February 1 plus the rest of
it.  The effect is the same, however, as if we had made mortgage payments
on January 1, February 1, and March 4.


Believe me, I have indeed checked the paperwork.