Having made that claim, I thought it worthwhile to verify my claim. Lookup up my recent refi papers, and then dl'ed the Fannie Mae/ Freddie Mac Uniform Instruments. Nice-----they are MSWord docs.
The lender does all the interest calculations on the scheduled due dates, which is the 1st of the month. Extra payments over-and-above the required payment goes toward principal. Unlike a simple interest loan like a car loan, the interest is computed as of the balance on the due date, and NOT computed on the average balance or computed from the previous payment.
From
Single-Family Uniform Instruments - Freddie Mac
The Note:
http://www.freddiemac.com/uniform/doc/3200-MultistateFRNote.doc
Highlights:
* I will make my monthly payment on the ___[typed in: 1st]____ day of each month.
* Each monthly payment will be applied as of its scheduled due date and will be applied to interest before Principal.
* Interest will be charged on unpaid principal until the full amount of Principal has been paid.
The Mortgage:
http://www.freddiemac.com/uniform/doc/3004-ArkansasMortgage.doc
There is actually a specific uniform mortgage form for each state.
Single-Family Uniform Instruments - Security Instruments - Freddie Mac
Highlights:
* “Periodic Payment” means the regularly scheduled amount due for (i) principal and interest under the Note, [plus T&I escrow].
* If each Periodic Payment is applied as of its scheduled due date, then Lender need not pay interest on unapplied funds.
* All payments shall be applied in the following order of priority: (a) interest due under the Note; (b) principal due under the Note; (c) [T&I escrow]. Such payments shall be applied to each Periodic Payment in the order in which it became due. ... Any remaining amounts reduce the principal balance of the Note.
* Voluntary prepayments shall be applied first to any prepayment charges and then as described in the Note. Any application of payments...shall not extend or postpone the due date, or change the amount, of the Periodic Payments.