Years ago, I learned a lesson I won’t have to learn again. It was that poignant. It was during a time when mortgage interest rates took a nosedive and we benefited by refinancing our high-rate mortgage.
The transaction closed in late August with the first payment due in October. Rather than take a month off from making a mortgage payment, we made an unscheduled payment in September to reduce the principal balance right off the bat. We sent a letter with the payment and wrote “Principal Prepayment” on the check.
A few weeks later, we got a statement showing that the payment had been credited to the October payment, not to pay down the principal as instructed. The confused customer service rep was kind but hardly apologetic when she explained that someone must have assumed that we really wanted to “pay ahead” rather than “pay down.” It took a little persistence to convince her of the contrary….