What happens when I make a partial payment on my mortgage?
Making a partial mortgage payment might seem like a good solution when money's tight, but it's a complex situation that needs careful consideration. I've seen many homeowners face this challenge, and understanding the implications can help you make better decisions about your mortgage payments.
Partial Payment: A payment made to a lender that is less than the full amount required for the scheduled monthly mortgage payment. While partial payments may be accepted in some cases, they typically do not fulfill the borrower's complete payment obligation and may result in the loan being considered delinquent.
How Partial Payments Work
Your mortgage servicer handles partial payments differently than full payments. Most lenders use what's called a suspense account - think of it as a holding tank for incomplete payments. They'll keep your money there until you've submitted enough to cover a full payment. Only then will they apply it to your loan.
For example, if your monthly payment is $1,500 and you send $1,000, that money sits in the suspense account. The catch? Your loan still shows as unpaid until you send the remaining $500.
Common Scenarios for Partial Payments
People make partial payments for various reasons:
Temporary cash flow problems
Mixed-up payment timing with paychecks
Bank processing errors
Bi-weekly payment plans (which need proper setup)
Consequences of Making Partial Payments
The ripple effects of partial payments can spread far:
Short-term Effects
Late fees start piling up
Extra interest charges accrue
Your grace period might not protect you
Long-term Impact
Your credit score could take a hit
Your payment history shows missed payments
Future loans might become harder to get
Alternative Options to Partial Payments
Instead of making partial payments, consider these options:
Ask about loan modification programs
Look into refinancing opportunities
Request a forbearance agreement
Check local payment assistance programs
Working with Your Lender
Open communication with your lender makes a huge difference. Keep these points in mind:
Call them before missing payments
Get everything in writing
Have your financial documents ready
Take notes during conversations
Common Misconceptions
Let's clear up some confusion:
Grace periods don't make partial payments okay
Paying something isn't always better than nothing
Credit reports don't distinguish between partial and missed payments
Tips for Avoiding Partial Payments
Prevention beats cure every time:
Set up a dedicated mortgage savings account
Build an emergency fund covering 3-6 months of payments
Use automatic payments when possible
Mark payment due dates on your calendar
Which banks allow partial mortgage overpayments?
Making extra payments toward your mortgage principal can save you thousands in interest and help you build equity faster. But not all banks treat these overpayments the same way. I've researched major lenders to help you understand which banks allow partial mortgage overpayments and their specific policies. Having this information can be crucial when you're looking to pay down your mortgage ahead of schedule.
Banks that allow partial mortgage overpayments:
Chase Bank
Allows unlimited overpayments without penalties
Offers convenient online portal for making extra principal payments
Clearly marks additional payments as "principal reduction" to ensure proper application
Bank of America
Accepts partial overpayments of any amount
Provides option to make biweekly payments to reduce principal faster
Automatically applies overpayments to principal unless otherwise specified
Wells Fargo
No penalty for making additional principal payments
Offers recurring extra payment options through online banking
Requires specification that extra amounts go toward principal
Citibank
Allows unlimited extra payments toward principal
Provides clear instructions for directing payments to principal reduction
Offers payment recalculation after significant overpayments
US Bank
Accepts partial overpayments without fees
Requires specific instructions to apply extra amounts to principal
Offers annual mortgage reviews to discuss prepayment strategies
PNC Bank
No prepayment penalties on conventional mortgages
Provides dedicated principal reduction payment options online
Allows one-time or recurring extra principal payments
TD Bank
Allows partial overpayments up to 15% of original principal annually
Provides clear online instructions for making principal-only payments
Offers amortization recalculation after significant overpayments
Capital One
No penalties for additional principal payments
Simple online interface for making extra payments
Automatic principal application for overpayment amounts
Regions Bank
Accepts partial overpayments of any amount
Offers biweekly payment programs to reduce principal faster
Provides annual mortgage checkups to review prepayment progress
Fifth Third Bank
No prepayment penalties on conventional loans
Allows both scheduled and one-time principal reductions
Provides clear online instructions for overpayment designation
Take Action
Don't navigate mortgage challenges alone. Bellhaven Real Estate offers expert guidance on mortgage management, investment strategies, and property solutions. Our team can help you develop a solid plan to maintain your mortgage payments and protect your investment.