I'm selling a house FSBO and I'm trying to calculate the correct way to charge a late fee. I'll give all the info that I think is needed.
The annual interest rate is 7%. The principal amount is $41,000. The principal and interest due each month on the 11th is $368.52 We escrow the taxes and insurance. The total amount due each month is $754.94.
Under Promise to Pay of the promissory note it states “If any amount is not paid either when due under the Terms of Payment or on acceleration of maturity, Borrower promises to pay any unpaid amounts plus interest from the date the payment was due to the date of payment at the Annual Interest Rate on Matured, Unpaid Amounts”
The Annual Interest Rate on Matured, Unpaid Amounts is 18%.
There is also a clause that says “if any installment becomes overdue for more than ten days, at Lender’s option a late payment of 5% of the amount of the payment may be charged in order to defray the expense of handling the delinquent payment.”
I interpret that to mean an optional late fee of 5% of PITI. 5% of the $754. I spell out the amount in absolute terms in my SF sales. $75 for instance. The language in your note sounds soft and ambiguous.
I'd turn this over to an attorney or to a servicer to handle. I know you are smart enough to probably figure it out, but from what I understand now, if you do it incorrectly there can be disastrous consequences.
I think you meant instead of FSBO, you sold with owner financing and now they are paying late?
Bruce Lynn you are right. I sold with owner financing.
Definitely get a 3rd party servicer and if it was owner occupied make sure you are CFPB compliant.
Your opening yourself up to getting completely hosed if your not following regulations. Not trying to scare you but make sure everything on your end is clearly in order if you need to push to foreclose
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