Personal Finance

Mortgage Lump Sum Decreases

  • Last Updated:
  • Jul 13th, 2020 11:56 pm
[OP]
Member
Jul 31, 2018
395 posts
194 upvotes

Mortgage Lump Sum Decreases

When you pay mortgage lump sum, it goes into mortgage cash account. This amount I notice decreases overtime even when I never missed a payment. I notice this because I put in $20k last month, and now the cash account is $19,980. Anyone know why it reduces?
full time realtor + medical professional
9 replies
[OP]
Member
Jul 31, 2018
395 posts
194 upvotes
bump, anyone know?
full time realtor + medical professional
Deal Addict
Oct 24, 2010
2440 posts
2290 upvotes
Ottawa
I'm not sure I understand. Who is your provider?

Typically when you put a lump sum against your mortgage, it just reduces the principal by that amount and subsequently adjusts/reduces your effective amortization schedule.
Deal Fanatic
Feb 4, 2010
6397 posts
5769 upvotes
Why not ask your mortgage provider - wouldn't it more accurate and quicker??
Deal Addict
Feb 22, 2007
2024 posts
267 upvotes
Mississauga
from my understanding...rates are compounded semi-annually...

so if you put in extra money every payment vs. lump sum at year end...you should be exactly/near the same
Deal Addict
Nov 6, 2015
1080 posts
670 upvotes
Guelph, ON
Don't know what a "Mortgage Cash Account" is. When I pay a lump sum, the principal amount owed on my mortgage goes down that amount. I wouldn't expect it to go to some "account". You should direct your question to your mortgage lender.
[OP]
Member
Jul 31, 2018
395 posts
194 upvotes
My mortgage lender is BMO. The bank said it's to do with mortgage interest fluctuation but I didn't quite understand.
full time realtor + medical professional
Deal Expert
Aug 22, 2011
37381 posts
23453 upvotes
Center of Universe
With TD, it's 15% of the original amount borrowed once a year, directly towards the principal.
Deal Addict
Oct 24, 2010
2440 posts
2290 upvotes
Ottawa
maxineli wrote: My mortgage lender is BMO. The bank said it's to do with mortgage interest fluctuation but I didn't quite understand.
I did some googling.

Apparently with BMO's products when you put down a lump sum or accelerate your payments, the excess is represented in something called a "Mortgage Cash Account" that you can leverage in the future as a HELOC-esque loan or a payment vacation.

I am not familiar enough with the nuances of the product to understand why interest fluctuations change its value.
[OP]
Member
Jul 31, 2018
395 posts
194 upvotes
Found more info about his Mortgage Cash Account:
"When you use your mortgage prepayment options, principal repayments go towards building a Mortgage Cash Account. The balance shown can change and is only available subject to meeting certain eligibility criteria."
full time realtor + medical professional

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