Hfc/beneficial72 WE HAVE A 30YR FIXED MORTGAGE FOR 4 YEARS THEY HAVE BEEN CHARGING ME DEFERED INTREST EVEN THOUGH YOU DON,T GO BEYOND YOUR GRACE PERIOD THERE IS COMPOUNDED INTREST AFTER BTHE DUE DATE, NOT IN ANY OF MY PAPER WORK OR IN TRUTH AND LENDING, JUST MADE AWARE OF THIS AND NOW AFTER 4 YEARS WE OWE MORE THAN THE ORIGINAL LOAN. NO ONE I HAVE SPOKEN TO HAS EVER HEARD OF THIS, WE NOW HAVE TO REFINANCE SO THI RIPOFF Worcester Massachusetts

I almost lost my home to these predators. I went through the very same exact thing, for over 6 years i was preyed upon. they did every bad practice in the book(see former litigation on them). we finally refinanced with another company, but our mortgage soared because of them. never, ever let any company do these things to you. and please report them, by all means, report them to the attorney generals office so they are aware that they are still doing this to homeowners(see litigation on there website).

Brian is close but it is not quite that bad. Daily interest is based on the number of days since the last payment, not the due date. So if you habitually pay late by the same number of days, you still pay only 30 or 31 day's interest with each payment.

The problem is the extra unpaid interest from the start of the loan due to the first payment being late. It seems like a small amount, but it sits there and compounds. If you have a loan for $12,000 at 10% APR for 30 years, the payoff will be $11,696 after 4 years with conventional monthly interest or daily interest and all apyments made on time. However if you paid every payment 15 days late, there will be 15 day's interest ($50.00) added to the loan balance before the first payment. This raises the payoff after four years by about $70.00. It also adds TEN PAYMENTS to the end of the loan if you let it stay there all 30 years.

Now if the APR is higher or if you actually miss some early payments (causing a long interval between payments), a state of "negative amortization" can occur. The balance becomes so much higher than the original loan that a standard payment is no longer enough to pay a month's interest. The loan will never be paid off without paying extra. It will be more and more extra the longer the negative amortization persists. The bank really has no incentive or requirement to directly tell the consumer that, so they don't.

As a former employee of this company, I can tell you that was a common complaint. This is what happened. This is a "simple interest" mortgage. That means you are charged interest daily. Your minimum monthly payment assumes that you will make the payment on the due date, so, even though you pay within the grace period you are still responsible for those extra days worth of interest. Say for example your payment in $100 per month, and your daily interest is $1.00. You pay your payment on the 5th, and it was due on the 1st. You would actually need to pay $105, to cover the interest short. It will add up quickly and before you know it, you end up owing much more than you borrowed.

It's called simple daily interest. It's very common on almost all loans except better mortgages. For example all credit cards and nearly all car loans (even prime ones) charge interest daily. It's never an advantage to the consumer but it is usually a relatively minor effect.

The real problem is it's a 30 year loan likely at a high APR. Say you borrow $12,225 at 10% APR for 30 years. Then even in the case that EVERY PAYMENT IS MADE ON TIME AND THERE ARE NO SHENIGANS BY THE BANK, you will still owe $11,908 after 4 years! You will have paid a total of $5150 in payments but only taken $317 off the balance. And it's absolutely legit.