Extra Stage — Managing Your Mortgage
Once you become a homeowner, you need to acquaint yourself with your mortgage payments. To make it easier, here’s an overview of how that works.
Monthly Payments & You
Once your mortgage goes through, you are required to make payments each month to your lender until the full amount you borrowed (called “principal”), plus interest has been repaid. Depending on the type of your loan, your monthly payments might also include mortgage insurance.
If you want a detailed breakdown on how your payments are broken up, check your mortgage statements. At the early stages, the bulk of your payments will go toward reducing the interest amount on your loan. Over time, this proportion will shift toward paying down the principal balance.
When an escrow account was involved in your loan, a portion of your payments will go toward them. This amount varies depending on your taxes and insurance premiums.
Your lender will go over your account every year to make sure they are collecting the appropriate amounts of money. Some adjustments will be made if they find they are receiving either too little or too much.
Pro Tip — The First Mortgage Payment
Your first mortgage payment isn’t usually due for up to two months after closing. But you have to pay a per diem interest at closing to cover the period between closing and the end of the month you closed.
Dealing with Missed Mortgage Payments
In a long-time financial commitment like a home loan, it isn’t surprising to eventually get behind on a payment. When that happens, if all you are is behind for a few days on your mortgage payment you are unlikely to have to pay a penalty.
Most lenders provide a grace period (usually around fourteen days) where you can make your payments without adding a late fee. That said, if you are unable to make your payment before the grace period ends, you’ll most likely have to pay a penalty fee. Also, keep in mind that late payments lower your credit scores!
So try to budget appropriately to always make payments within your grace period.
Pro tip — Anticipating Delayed Payments
When you know you are going to be behind on a mortgage payment, the best thing to do is contact your lender right away, If you are experiencing a diffcult time, your lender may create a payment plan to help you out.
Remember that missing multiple payments can hurt your credit score and even lead you to default on your loan. So keeping on top of your finances is a huge part of dealing with your mortgage.
