Most often, people would put their extra savings into the housing loan intention to
save some interest by reducing their loan principal (Let’s assume $200). However, we do not know whether the bank officer do as the borrower’s intention. They may treat $200 as
an advance payment and keep in the “Suspense Account”
“Suspense Account” defined as “any money received may be placed and kept to the credit of non-interest bearing suspense account for so long as the Bank thinks fit without any obligation in the meantime to apply the same or……”
If this the case, do you think you are able to save interest ??
One of my friend, Mr.Q has put his extra payment up to $16,000 (within 3 years time) into the mortgage loan for principal reduction by filled up the relevant form provided by bank. However, when he receive the loan statement, the bank has treated his extra payment as “Advance Payment” and kept in the suspense account without reducing the principal.
He is surprisingly when he received the bank statement that his $16,000 actually lending to bank with INTEREST FREE. Obviously, bank do not do what he expected bank will do for him (reduce principal).
Imagine if he is putting $16,000 to his other investment vehicle, he may gain some return rather than putting in bank.
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