Q: We have read in your past columns about how to pay off a mortgage in half the time. We recently refinanced with a 30-year mortgage, which we now hope to be able to pay off in 15 years. I understand the concept of prepaying principal, and I hope we have the will power to see it through for the next 15 years. My question is, does it matter what time of the month I send in the principal only payment? Our monthly mortgage payment is automatically withdrawn from our checking account on the 10th of each month. I get paid every other week, I must budget each payday for the principal-only portion that I have to send to the mortgage company. For example, this month, I was paid on the third and the 17th. On the 17th, I mailed in the extra principal payment. The other part of my question is if our monthly mortgage payment is due on the 10th, should the principal only payment still be paid by the first of the month? – M.N., Lynnwood

A: As long as you have made the minimum required mortgage payment each month, you can send in the extra principal payment anytime you want.

For example, let’s assume that your regular mortgage payment is $1,500 per month. If you made the $1,500 payment on the first of the month, or within the 15-day grace period, you would be up to date with your mortgage lender for that month. You could then send another $500 principal only payment on the 20th of the month, or any other day that you chose.

However, be sure you understand that you can’t do it the other way around. You could not send in $500 on the first of the month and $1,500 on the 20th and expect the mortgage lender to consider the loan paid as agreed. That’s because even though you paid more than the minimum required payment during the month, you did not pay the minimum amount due by the end of the 15-day grace period.

Lenders will not accept partial loan payments. In the example above, the lender would probably send the $500 check back to you and treat the $1,500 payment mailed on the 20th as late and charge you a late fee.

As I mentioned, most lenders allow a 15-day grace period for loan payments. In other words, your loan payment is due on the first of the month, but no penalty fees are assessed as long as the payment is received within the first 15 days. As a result, many borrowers – including myself – play the float game and routinely pay their mortgage between the 10th and 15th day of each month in order to hang on to their money as long as possible and earn a few extra dollars of interest.

You are fortunate that your bank allows you to have an automatic withdrawal of your mortgage payment on the 10th of the month. Many lenders require automatic loan payments to be taken out between the first and fifth day of each month, cutting into the float time.

For readers who don’t have the luxury of an automatic mortgage payment withdrawal from their checking account, just remember to make sure your regular payment reaches your lender prior to the cut-off date for the late fee (typically the 15th or 16th day of the month).

Any separate checks for prepayment of principal must contain the loan number and clearly state that the money is to be applied to “principal only.” Otherwise, the lender might deposit the money into your escrow account to pay your property taxes and homeowner’s insurance. That’s not necessarily a bad thing, but it doesn’t help pay your loan balance down any sooner.

Mail your real estate questions to Steve Tytler, The Herald, P.O. Box 930, Everett, WA 98206. Fax questions to Tytler at 425-339-3435, or e-mail him at economy@heraldnet.com

Steve Tytler is a licensed real estate broker and owner of Best Mortgage, Inc. You can visit the Best Mortage Web site at www.bestmortgage.com.