Mortgage Question - Off Topic

[geekgirldany]

This question really does not relate to taxes but I would appreciate any input.

A customer asked me about her mortgage. She has two both are fixed rates. On one though she said the interest is varying on the last few payments. She said that on one payment vouncher the interest would be $600, the next payment $200, then this last payment she said all of it was interest around $1000.

I told her that if it was fixed it should be interest at first and then slowly start going towards the principal. Mortgage is 20 years, she has been paying on this one 10 years.

The mortgage was purchased by another lender. Is it possible that the new lender has changed the fixed rate to a adjustable rate?

I told the customer I would try to find out some information about if I could. Would appreicate an input.

Thank you

[JohnH]

You need to see the last 3-4 statements in order to figure out what's going on. It could be that the new mortgage company has made an error in transferring the loan into their system. It could be that she had a variable-rate mortgage which was fixed for a certain period of time and the variable rate is now kicking in, but she doesn't know what she has. It could also be that she is seeing changes in the escrow account for property taxes & insurance (if she has one) due to overages or shortages, and she is confusing the escrow adjustments with regular loan P&I payments.

When someone calls me with questions about mortgage statements, I tell them to send me the statements for starters. If they try to explain them to me or start tgrying to read the entries to me on the phone, I just refuse to discuss it with them until I see the paperwork.

[S T]

Some Thoughts

Dany,

I will throw out some thoughts, but you probably need to really look at the loan papers to really know what type of loan she has. Sometimes the monthly statement will also lend some interesting facts these days.

My first thought would be that t/p is not paying the loan timely, so therefore, the interest and principle amount would vary, as I believe the interest charged is always between payment dates.

i.e, if the client always pays every 29 to 30 days, then you will see that the interest amount is close to the same each month, diminishing slightly by a few dollars. However, if one month the client pays at 30 days and the next months pays at 45 days, the 2nd month would have a higher amount for interest as it was longer between payment dates. Still a fixed rate, but the date between payments would charge more interest.

The other scenario from what I have been seeing the last few years, is that yes there is a fixed interest rate on a loan, but the mortgage holder will provide the client with 3 or 4 payment options on the the monthly statement. You can pay $1,000, $1,200, $1,500, $1,800. The regular payment on the fixed is $1,800, but the client for this one or two months decides to pay $1,000 or $1,200 respectively.

When that is done, the lesser payment, then adds a negative amortization to the loan, as the principle amount was not paid, but neither was all of the interest payment. Client effectively delayed some interest and all of the principle amount.

Then moving forward there is more interest due as the principle is increasing instead of decreasing.

As John H pointed out, could be that her payment increased if she has an "escrow" account for property taxes and insurance, and the payment went up, but that usually does not affect the amount of the interest in the way you described.

I have found that taxpayer's/client's are very confused these days by their mortgage payment statements if in fact they have a loan that they have acquired in the last 5 to 7 years.

Sandy

[geekgirldany]

Thank you all for responding. I have called the customer and she is going to bring by the loan papers and payment coupons. The way things are going there is no telling how the loan was written up.

I really do appreicate the information and help.