Paying off a Home Equity Loan

abbey_cnyOctober 28, 2006

I have a home equity loan and I am a little confused about making additional payments on it. I know when I make an extra payment on my mortgage I have to make sure it is applied to the principle. Does it work the same with the Home Equity?

I would like to get this loan paid off, it isn't too large thank goodness, and I want to make sure I make my payments the right way.



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Yes, a home equity is just like a regular mortgage when you send extra payments for paying down principal. We're doing that every month right now and have to do it by check. Just make sure that your lender, assuming you have the same lender for the first mortgage and the home equity, applies the payments to the right loan - check your account on their website regularly. We have Countrywide and they often apply the home equity principal payments to the first mortgage. Many many phone calls to them to straighten these out ... that part of making the extra payments is a pain in the ...

If you pay by check, write the loan number on the check AND on a note that you enclose with the check. Doing this, though, is still no guarantee that they'll get it right. Paying on line should reduce these goofups.

    Bookmark   October 29, 2006 at 6:34AM
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I pay extra on my HELC every month and the extra gets credited to the principal. kec01's point is well taken and the reason I avoid using the same financial institution for 2 different loans. I have had mix-ups with the same bank who co-mingled personal and business transactions. I finally withdrew my personal business. I have to hassle Macy's about every 6 months. They credit my regular payment with my major purchase account, which I rarely use. I end up with a regular account past due balance, which (surprise) is equal to a credit on the major purchase account. When I call, I'm clearly dealing with a foreigner and it takes a couple phone calls, usually, to get it straightened out. I guess it's computer operator error, keying in the wrong acct. #. Very annoying, though.

    Bookmark   October 31, 2006 at 11:46AM
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Thanks for the information. The Home Equity is with a different bank than my mortgage, so that eliminates one problem. I do a lot of on line banking, but probably won't do it with the home equity because there would be no way to tell them to put it on the principal. At least now I know I do have to tell them that. Hope to see that balance start going down soon.


    Bookmark   October 31, 2006 at 12:26PM
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check w/ your bank to be sure; on my HELOC, since the interest MUST be paid, any extra automatically goes to the principal. I just write a check for more than the interest, w/ no extra notation, and next month I see that the principal is a little less than it was.

At my first mortgage, however, I did have to specify that the extra was to be applied to the principal, or it didn't happen.

    Bookmark   November 3, 2006 at 2:12PM
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I realize the original post is relatively old, but here I go:
You need to review your documents and contact your lender. This varies widely from company to company and loan program to loan program. With the finance company I work for, in my state, any payment in excess of the interest owed on the date of the payment is automatically applied to the principal. You don't have to ask. You don't have to write two separate checks. You don't have to do anything but pay more than the interest that has accrued on the loan. We also don't have prepayment penalties in my state (with my company). You need to contact the lender, but definitely review your documents. A representative can tell you anything (a lot of people are just plain stupid or misinformed, and they have jobs with banks, finance companies, hospitals, and a number of other places where their ineptitude will seriously impact people like you and me), but it will never be as legally binding as the documents you signed. If you no longer have copies of your documents, you are well within your rights to request them. This question can't be adequately answered in a forum like this without access to your loan/line of credit documents.

    Bookmark   July 4, 2007 at 1:31AM
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Mine is like talley sue's. I called when I received my first bill & asked what I needed to do to apply the extra I was paying to the principal. They told me that anything I paid above the interest automatically went to principal. It's probably best to call your bank & ask. Then check to make sure that's what happened.

    Bookmark   January 16, 2009 at 6:46PM
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