Must a Mortgage Payment Be Made Every Single Month (if Paid Ahead)

[LG357]

My question involves real estate located in the State of: SC

I sold some property using seller financing. The paperwork was all written up by a very good lawyer, and the buyer is to pay me a minimum of $437 (including interest) monthly for the mortgage. They usually just round up to $450, so technically speaking they are ahead of the given payment schedule. (8 year contract) This is totally acceptable and well within our contract.

Sometimes, they try to pay 2 months at once. IE, pay $900 for January and then pay nothing in February. Normally I just go along with it, and mark it down as paid on time for both months.

For reasons that would take too long to explain, I no longer wish to do this. If a person pays double the required minimum amount for their mortgage does that mean they don't have to pay again next month? I don't think that's how it works. You can pay as much as you want over the minimum, but, if not paid off entirely another payment is still due next month. Am I wrong?

As an example, I pay more than the minimum amount due every month on my credit card, but, they still expect me to make a payment again next month no matter what, unless my balance is zero.

[free9man]

How does your contract addresses the handling of excess funds received? Most contracts I've seen will simply apply excess funds to either the principal or interest but do not count it as an additional payment.

You also have to deal with the fact you have set a precedent of allowing it in the past. What did they say when you told them you do not wish to apply additional funds to future payments?

[LG357]

How does your contract addresses the handling of excess funds received? Most contracts I've seen will simply apply excess funds to either the principal or interest but do not count it as an additional payment.

The only part of the contract I see anything relevant to that says this:
"If payable in installments, each such installment shall, unless otherwise provided, be applied first to payment of interest then accrued and due on the unpaid principle balance, with the remainder applied to the unpaid principle"

Also,
"Unless otherwise provided, this note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity."
I'm not quite sure what they mean by "reverse order of their maturity".

You also have to deal with the fact you have set a precedent of allowing it in the past. What did they say when you told them you do not wish to apply additional funds to future payments?

We do not speak. Buyer thinks they are a lawyer, making up more fake laws than The Donald. Things have gone downhill very, very quickly. Police have been involved.

[Taxing Matters]

I'm not quite sure what they mean by "reverse order of their maturity".

That would mean that the prepayments are first applied to the very last payment that would be due under note and work back from there.

[llworking]

The only part of the contract I see anything relevant to that says this:
"If payable in installments, each such installment shall, unless otherwise provided, be applied first to payment of interest then accrued and due on the unpaid principle balance, with the remainder applied to the unpaid principle"

Also,
"Unless otherwise provided, this note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity."
I'm not quite sure what they mean by "reverse order of their maturity".



We do not speak. Buyer thinks they are a lawyer, making up more fake laws than The Donald. Things have gone downhill very, very quickly. Police have been involved.

Based on the fact that you have allowed them to make prepayments in the past I would think that at a minimum you should inform them that you will no longer accept prepayments.

[Taxing Matters]

Based on the fact that you have allowed them to make prepayments in the past I would think that at a minimum you should inform them that you will no longer accept prepayments.

The contract portions the OP quoted specifically says that prepayments are allowed without penalty or premium. So telling the buyer he will not accept prepayments at all may result in breach of the contract. But what he can likely tell the buyer is that the prepayments will be applied in reverse order per the contract so that the payments will first apply to the very last payment that will be due. That would then mean the buyer still has to make the regular payments until he's paid enough prepayments + regular payments to cover all the loan obligation. The OP should see a lawyer to have the entire contract reviewed and get advice on his options.

[adjusterjack]

We do not speak. Buyer thinks they are a lawyer, making up more fake laws than The Donald. Things have gone downhill very, very quickly. Police have been involved.

Does your contract have anything in it that says something like if you make any accommodations you have not waived your right to not make them in the future?

How many payments of $450 have you accepted in lieu of $437?

To accurately determine his balance you are going to have to recalculate the principal each time that additional $13 should have been applied.

[LG357]

That would mean that the prepayments are first applied to the very last payment that would be due under note and work back from there.

Makes sense. Last time they did this, I explained that isn't how it works but said I would apply it to each month anyway. I made it clear I was not happy with the situation and it should not continue this way. (I'll have to go check, I may have said not again in the future) That means I was unknowingly not following the contract. Can I go back to those months that did not receive a payment and say pay up, given appropriate number of days notice?

What I would really like to move towards is the clause that says after 15 days of non payment, (after 10 days of notice) I can declare the full amount immediately due. They currently think a 2 month payment is in the mail, but I will only apply it to this month and the very last month. (they never asked permission for this of course)

The main problem we have here is that they think they are the boss, and can apply the rules however they see fit. They need to be motivated to seek alternate financing.

Does your contract have anything in it that says something like if you make any accommodations you have not waived your right to not make them in the future?

How many payments of $450 have you accepted in lieu of $437?

To accurately determine his balance you are going to have to recalculate the principal each time that additional $13 should have been applied.

I'll have to double check the contract again. It is surprisingly long. The majority of payments have been slightly over, and yes, I will have to go through and move all the over payments to the end unless I specifically said otherwise. It has not all been fully accounted for at this time, I just keep a running spreadsheet with payments and dates. As it is right now it's not important what the total balance is, because it's still years away from being paid off.

[adjusterjack]

They currently think a 2 month payment is in the mail, but I will only apply it to this month and the very last month.

No, that's not the way amortization works. If you do that you will be overcharging them interest and you'll be in breach of contract.

The way it works is that any overpayment that doesn't have to go to interest goes to reduce principal and the remaining principal and next month's interest has to be adjusted.

(they never asked permission for this of course)

They didn't have to get permission to prepay. What they shouldn't have gotten was permission to apply the extra payment to the following month. You did that.

[budwad]

Each monthly payment of $437 is part principal and part interest based on an amortization schedule that your lawyer should have given you. If you don't have one, you can generate one online based on the principal borrowed, the interest rate, and period of the loan.

Each time a regular (monthly) payment is made ($437) one line of the schedule tells you that $X is interest and $Y is principal. The balance of the loan is reduced by only the principal paid.

Any excess payments in a regular payment only reduces the principal at the back end of the loan. Meaning that the credit to interest will only be reduced (each month) based on the principal balance for that month. The principal balance does not change no matter how much they pay and the principal is reduced by the excess money over the monthly payment at the end of the loan. But each monthly payment is based on the front end of the schedule.

You can take a 30 year mortgage and pay it off in 15 years by paying your monthly payment (principal and interest) and adding the next month's principal amount to the payment. You don't get charged interest for that next payment because you already paid it. You skip the next line on the schedule.

I'm sure I confused you. But the bottom line is that when a mortgage payment is a fixed amount that part is applied to interest and the remainder amount applied to principal it changes each month .

"

If payable in installments, each such installment shall, unless otherwise provided, be applied first to payment of interest then accrued and due on the unpaid principle balance, with the remainder applied to the unpaid principle"

You're going to get yourself into trouble if you don't know how much you received in interest and how much of the principal was paid back. How are you going to report your interest earnings on the loan to the IRS if you don't know what they are?

Talk to your lawyer.