Q: I have a related issue to the recent question regarding payment of extra principal on a mortgage. A few years ago, I read an article that found banks and mortgage servicers were miscalculating the monthly interest charge when customers submitted payments for additional principal. Is there a standard regulation as to how interest is to be recalculated for the next payment? Does it depend on when the bank actually receives the payment?
A: To my knowledge, there are no regulations as to how and when the interest should be calculated. However, the deed of trust (or the mortgage document) usually spells out the procedure for making additional payments.
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My suggestion is to make your extra payment when you make your regular monthly payment; in other words, include the extra with the regular and send one check. But make sure that you advise the lender that you are making an extra payment and list the amount.
If you know how to compute interest, then do the numbers each month. Otherwise, have your financial adviser or accountant calculate what the interest should be and have him or her compare it with the interest reflected on Form 1098 that your lender must send you every January.
Equally important: Have your financial person also confirm that the outstanding balance is correct. Obviously, because you are making extra payments, your balance will be going down faster, or at least it should if the lender is doing the right calculations.
Q: Our family has a vacant plot of land in a residential Chicago neighborhood. I wasn’t aware of this until four years ago when a couple of purchase solicitations came out of the blue via phone from tax buyers.
In retrospect, we should have proceeded with the offer — first $2,000 and then $4,000 — as this was prerecession. Instead, we paid the back taxes of about $20,000 and tried to sell the property.
As the economy tanked and construction went under, any opportunities to sell dried up, and I’m left with nothing but twice-a-year property taxes.
I recently solicited the lot to Habitat for Humanity, hoping to get a tax benefit for the donation. They took a look, apparently, but came back and said they weren’t interested.
I originally made a proposal to the owner of the three-story condo next door, who could use this land as a large garden or another buildable area, but he wasn’t interested.
Now the tenants use my lot for gardening and other outdoor activities, which doesn’t affect the lot in any way but does, admittedly, stick in my craw. Can you suggest any options to help me get this off my hands.
A: Have you tried giving the property to a charitable organization or a religious group? That would be my first recommendation.
Second, have you tried to sell it using a real estate agent? “Nothing ventured, nothing gained,” as the saying goes.
Finally, you could just stop paying the real estate tax and let the city or county sell it at a tax sale. I am generally not an advocate of this approach, but in your case it may be your last resort.