Avoiding Mortgage Management Problems

By:
Peter King - MortgageLoan.com
How well are you managing your mortgage? It’s an often overlooked aspect of home finance – many borrowers assume that once they sign the loan papers, their only remaining challenge is coming up with the mortgage payment each month. But there’s a lot more to it than that.
 
Having a mortgage is not like paying your cable or electric bill every month. For one thing, it’s much, much bigger – so it has a far greater potential impact on your life. Your cell phone bill you can simply pay and forget each month. But doing the same with your mortgage can be very costly.
 
There are a lot of serious mistakes that people make by treating their mortgage payment the same as any other bill, although a much larger one. Simply making your monthly payments isn’t enough – your mortgage is a bill that’s in a class all its own and demands special attention.
 
The following are some of the mistakes people commonly make in handling their mortgages.
 
1 – Throwing away old billing statements.  For most monthly bills, you can throw the old statement away as soon as the new one arrives, or in some cases, after one year. You don’t want to do this with a mortgage.
 
The reason? Those statements are your only record of the activity on your mortgage account. If your mortgage is sold to another servicer – as frequently happens – those records may not be transferred to the new bank, or may be incomplete. There’s no legal requirement to do so. As a result, you might not be fully credited for escrow payments you’ve made or get stuck with other charges – and be unable to obtain those records from your previous lender, particularly if that lender has failed. Saving your statements gives you a record of all the activity on your mortgage.
 
2 – Not reviewing your monthly statements. Were your payments properly credited? Were escrow funds posted to those accounts the same day as the rest of the payment they were included with?
 
3 – Failing to refinance when conditions are right. Although low interest rates generate a lot of interest in refinancing, many people still stick with their same old mortgage through sheer inertia. Remember, if you can reduce your current rate by a full percentage point and plan to be in the home another four years or more, it’s probably worth your while to refinance.
 
Remember too, that if you’ve been making regular mortgage payments for several years with no late payments on other bills, your credit has probably improved since the time you first took out the mortgage and you may have acquired equity in the property as well (although many homeowners have seen declining equity in recent years). Both will enable you to obtain a better interest rate relative to the market average than you were able to when you first took out the loan.
 
4 – Failing to be alert for better deals on homeowner insurance. Since homeowner insurance is typically rolled into the mortgage payment, many homeowners simply don’t bother shopping around for better deals once the mortgage is in place – it seems like too much bother. The fact is, the insurance company that might have been able to give you the best deal five years ago may no longer be able to today. Also, you can often save money by getting a combined policy for all  major needs – house, car and disability/life.
 
5- Assuming that electronic payments are the easiest, cheapest way to go. People who are used to paying online may naturally do so as well with their mortgage payment. But beware – you may find yourself stuck with hefty “convenience fees,” particularly as you get closer to the end of your monthly “grace” period, for paying online, which may rival late fees themselves. However, if you choose to pay by mail, be sure to allow adequate time for your payment to reach its destination – a minimum of five days, more if weekends or holidays are upcoming.
 
6 – Failing to maintain a savings reserve for emergencies. Your monthly mortgage payment can quickly go from manageable to an unruly monster that threatens to wreak havoc with your finances if other major expenses arise or you suffer a temporary loss of income. In situations like these, having reserve savings equal to 6-12 month’s mortgage payments can make all the difference between successfully managing the problem and a major financial crisis.
 
Follow these steps and, while your mortgage payments may not be a breeze, you can at least save some serious money and avoid some of the major pitfalls that can trap borrowers.
 

 

 

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