I got an email today alerting me that my mortgage payment was past due. No, I haven’t fallen into arrears due to my own irresponsibility and interest-only bad loan. I was trying to pay off my debt faster, actually. Here’s the story.
My mortgage is with CitiMortgage (subsidiary of CitiBank, which is running into a bit of trouble these days and apparently taking it out on me). A few weeks ago, I got this letter in the mail about how CitiMortgage offers a BiWeekly Advantage Plan that lets you pay off your loan faster (they love the MidCaps there, don’t they?).
In a nutshell, you pay half your mortgage payment at the beginning of the month, and the second half in the middle. This adds up to about one extra payment per year, which helps reduce your overall compounding interest — they note that “a homeowner with a $100,000 balance, on a 30 year loan at 6% could save $24,138.65 in interest and pay off 5 years; 5 months sooner.” I live in California. My mortgage is a LOT more than $100,000. This ain’t chump change to me. But then I read where CitiMortgage charges a one-time fee of $375 to set up this “service,” and charges $1.50 for each payment. Because even though I thought I could just start sending two payments a month, CitiMortgage helpfully notes:
“Some homeowners try to make extra principal payments themselves, but most arenâ€™t able to keep a consistent schedule. Let The BiWeekly Advantage (SM) Plan do the work for you.”
Yeah. But see, hubby pointed out that it’s not super hard to keep a “consistent schedule” if you’re using online billpay. So, we just changed our billpay schedule and said, “to heck with you and your fees, we’re no dummies!” About a month and a half went by … which is when we got the letter saying our mortgage was past due.
It appears that Citi has been applying our payments to principal only–not to the interest due. So, half the payments don’t count as payments, just “extra” principal payments. And when we called them and said, “we’re just trying to make bi-weekly payments,” they said, “we can’t apply the payments to your interest unless you call us every time you send an extra payment.” And hey! Guess what they tried to sell us? The $375 BiWeekly Advantage (SM) Plan with $1.50 draft charge per payment!
When hubby pointed out that it hardly seems fair that we either have to pay to send extra payments or call every time we send one to make sure it’s properly credited, he got the customer service equivalent of a big “who cares” shrug.
It seems to me that In These Troubled Times (drink!) CitiBank ought to welcome anyone who wants to aggressively pay their mortgage, and not try to soak them for a little extra cash by ensuring that aggressive payment is such a hassle that it’s hardly worth the long-term interest savings. This feels like an old-fashioned protection scheme (“you throw us a little payola and we make sure your payments are properly processed”) at best and seems to come close to extortion at worst. I know times are tough at Citi, but you know what you’ll probably need to get through them? Customers. Interest rates are falling and I’ve got good credit, CitiMortgage. Keep this crap up and I’ll refinance my way right out of your failing ass.Read more →