How To Pay Your Mortgage In
If your mortgage servicer is local, the company might accept payments by check or money order in person. Money orders are secure payments since they do not include any personal information, but they have one major drawback: The amount of a money order is often limited to between $700 and $1,000.
Another option is to use a certified check or a cashiers check, which do not have a limit.
Mailing a check is a tried-and-true method, but make sure you include your account number on the check just having your home address might not be sufficient, even if it matches the address your servicer has on file.
Sending a payment by mail, however, means you have to take into account the time it takes to mail your payment and for it to be processed by the servicer.
When Are Payments Considered Late
While mortgage payments are due on the 1st of the month, Wise says that theyre generally not considered late until after the 15th. As for impacting your credit, she says that payments will generally not affect your credit until theyre 30 days late. If you pay on the 16th, you will likely be charged a late fee, but you probably wont have anything show up on your credit report.
However, this doesnt mean that Wise suggests that you put off making your payment.
My best piece of advice, and I think the best practice, is to pay a mortgage payment early dont get in the habit of pushing it all the way out to the 15th because that spot for time is built in for you for cases of emergency.
What Closing Date Is Best
After digesting all of this information about calculating your first mortgage payment date, how interest and principal payments work, and how partial month interest fees are paid at closing, youre probably left wondering if its better to close earlier or later in the month.
It all comes down to whats best for your financial situation. A closing date later in the month will reduce your prepaid interest costs, but it also means your first mortgage payment will be due in just over a month. Conversely, a date earlier in the month will give you more time before your first payment but will result in a higher prepaid interest amount, raising your closing costs.
You should consider your cash-on-hand against your upcoming cash flow. This can help you determine which priority is more important: lowering your closing costs or having more time before your first payment, allowing you to bring in more income before your monthly payments begin.
Now youve got the basic understanding of how to calculate your first mortgage payment due date.
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How Much Your First Mortgage Payment Will Be
To find out how much your first mortgage payment will be, check your closing disclosure form. You’ll get this form at least three days before closing, and it will say how much your monthly mortgage payment will be.
If you have a fixed-rate mortgage, your first mortgage payment will be the same as each subsequent payment throughout the life of the mortgage. The only caveat is that your payment may be adjusted to accommodate higher property taxes or homeowners insurance, both of which are paid from your escrow account.
If you have a variable-rate loan, your first mortgage payment will be the amount listed on the closing disclosure form.
Learn more:Closing Disclosure: What It Is, How It Works, and How to Read One
Should I Include Anticipated Utility Costs In My Monthly Payment Calculation
You shouldnt include utilities in your monthly mortgage payment calculation, but its important to consider and include them as part of your budget. If youre used to renting a 900-square-foot apartment, expect your utility expenses to go up significantly in a 2,000-square-foot home, in addition to new utilities such as trash, water, and sewer that you may not be used to paying directly, depending on where you currently live.
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Before You Start Home Shopping
Its a good idea to run some options in a mortgage calculator long before you ever start your home-buying journey. While property taxes and homeowners insurance can be hard to project on a home that you havent even picked out yet, our calculator allows you to estimate them.
Homeowners association fees can be extremely common in some areas, particularly those with new construction and similar homes, but they are much less common in more established communities. HOA fees on some properties can constitute a large portion of your budget, so consider the type of home that you want to buy and look up one currently for sale to see if you can get an idea of the HOA fees. If you want a brand-new condominium in a community with plentiful amenities, expect to pay a hefty HOA fee.
Is There A Grace Period For Late Payments
Luckily, yes. Without control, we may stumble upon other expenses that were at the time a higher priority than paying our monthly mortgage.
Most mortgage lenders will not be strict about the due date of the first of the month. Usually, they will offer a 15-day grace period starting from the first of the month. That means the actual last day you have to make your payment is the 15th of the month.
Still, you should proceed with caution. Most homeowners should have any kind of bank account, and be fully aware of the fact that transactions dont go through immediately or even the next day. If you are planning to make a late payment, aim to make the transfer no later than the 10th of the month, allowing up to five days for it to populate in your mortgage account.
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When Is A Mortgage Payment Considered Late
Most mortgage contracts include a grace period after the monthly due date during which your payment is not considered late. This period is typically 15 days. If your payment is due on the first of the month, your lender will accept payment until the 16th with no late fees or penalties. It won’t report your late payment to the credit bureaus until you are at least 30 days past due.
Paying More Prepaid Interest
There is a tradeoff between closing earlier and later in the month. Close early means you have a longer time to make your first payment, but pay more in prepaid interest as part of closing costs. Closing later means you pay less prepaid interest, but your first payment date will hit you sooner.
In the above example, you might be better off closing on March 10 instead to give yourself more time before owing payment on May 1. In this situation, youâll prepay the interest for the entire period before your first payment, as part of your closing costs. While youâll owe more upfront at the closing table, youâll have longer to make your first official mortgage payment. Then, your next payment will come due the first of every month afterward.
That extra time to make your monthly payment can be very important, especially if your new home stretches your budget. Youâll still need liquidity for movers, furniture, and any planned and unplanned maintenance costs. If youâve been renting, you might still owe some utility or rent costs on a lease.
While closing later in the month means youâll be responsible for less prepaid interest, sometimes it can be helpful to close closing at the beginning of a month to give you more time to plan your budget and earn some more money to prepare for the impact of a mortgage payment. Plus, it can save renters from paying rent and a mortgage in the same month.
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What Happens If I Miss A Mortgage Payment
The grace period gives you some flexibility for making your mortgage payment. But, if you pass the grace period, you could face penalties from your lender. All mortgage companies have different policies regarding late fees, so you should read the fine print in your agreement.
Lenders usually charge a late fee if you miss the 15-day grace period. Additionally, they may report your payment as delinquent to the credit bureaus if you are more than 30 days late. Delinquent payments can remain on your credit report for years, so you should do everything in your power not to miss your mortgage payment.
You should contact your lender directly if you pass the grace period and miss your mortgage payment. Although some lenders have strict rules and will not budge on their late fees, you might be able to negotiate if you speak directly with a customer service agent. Your lender also may not report the delinquent payment to the credit bureaus if you explain your situation to them.
Beginning Of The Month
Closing early in the month means youll have nearly two months before your first payment is due, since your first mortgage payment is typically due on the first day of the month after youve been in the home at least 30 days. As an example, if you close on February 3, your first payment will not be due until April 1.
Your closing date will also affect how much cash youll need to close the loan. Interest on a mortgage loan is paid in arrears, which means that a payment due in March would cover the interest for the month prior in February. By having a February 3 closing date, daily interest charges for the remaining 26 days of the month will be added to your closing costs. Your first mortgage payment due April 1 due date would then cover the interest accrued for the month of March.
In other words, by closing at the beginning of the month, youll have more time before your first mortgage payment is due, but youll owe a bit more in interest charges at closing.
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Automate And Maximize Savings
Set up automatic transfers from your checking to savings accounts, so the money is out of reach for immediate spending.
The stock market is too volatile for short-term savings less than 10 years so when saving for a house, keep your money in a high-yield savings account, a money market account or certificates of deposit instead.
The CDs should be timed to mature just before you want to buy a house. Maximize your savings by getting the highest interest rates possible.
Why Is My First Mortgage Payment So High
Q Ive recently taken out my first mortgage with Alliance & Leicester. My monthly payments are supposed to be £1057, but my first premium is an extra £178 is this normal?
A Yes, it is. You make your mortgage repayments in advance, for the incoming month. But you start paying interest on your mortgage from the date the lender releases the funds, usually the day before you complete your house purchase.
Your first mortgage payment may not be due for several weeks, depending on the date you move in and your regular repayment date, but you still have to pay interest from the date funds are released.
In your case, your first payment wasnt due until a month after you had completed, so you owed the lender interest for the month that had elapsed, plus your regular capital and interest payment for the incoming month.
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Can I Reduce My Mortgage Repayments
You may be able to extend your mortgage term in order to lower your monthly mortgage repayments.
For example, if your mortgage is currently on a 25-year term and you move it to a 30-year term, your monthly repayments will fall as you are taking longer in order to clear the capital you’ve borrowed.
While this will reduce your monthly outgoings, it will increase the overall amount you repay. Because you are taking longer to clear the capital you’ve borrowed, you’ll also be charged interest for longer, meaning a larger total repayment.
Let’s look at an example. If you borrowed £200,000 over 25 years at an interest rate of 5%, you’d repay £1,169.18 monthly and repay £350,754 in total.
Extending your term to 30 years will reduce your monthly repayments to £1,074, but you’ll repay £386,512 – an extra £37,758.
You may also be able to switch part or all of your mortgage debt onto an interest-only mortgage. Lenders may offer this as an option if you are experiencing some financial difficulties to help you avoid falling into arrears.
Remember, while this will mean lower monthly payments, you will still need to find a way to repay the capital you borrowed at the end of your mortgage term.
How Much Is Your First Mortgage Payment
For fixed-rate mortgages, your first payment amount will be the amount you pay each month over the course of your mortgage loan term.
Your mortgage follows whats known as an amortization schedule. It works like this: For the entire term of your loan, your mortgage lender has a schedule breaking down how much of each payment goes toward principal and how much goes toward interest. Your first payments consist of mostly interest, with any extra you pay being allocated to your loans principal balance.
Your mortgage payment will also contain money to fund your escrow account, which most commonly collects money for homeowners insurance and property taxes. Fees, such as processing fees and late-payment fees, can also be included in your mortgage payment.
Knowing the amount of your first mortgage payment and when to pay it is an important way to prepare yourself for the financial obligations of purchasing and owning a house. If you receive initial mortgage approval before you start house hunting, youll have a better idea of the costs that come with home buying from how much you can afford to pay for a house to the amount youll need for closing and your mortgage payments going forward.
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When Is A Mortgage Payment Typically Due
In most cases, mortgage payments are due on the first of the month. However, due dates can vary, so you should confirm your payment date with your mortgage lender before your payment is due. Some lenders allow borrowers to change their payment due date to a day that better fits their schedule, but not all provide this option.
Figuring out the date of your first mortgage payment can be trickier. If you closed on your new home in the middle of the month, you’re probably wondering whether your first mortgage payment is due at the beginning of the next month even though a full 30 days hasn’t passed since closing.
Fortunately, most first-time mortgage holders get a little extra time before they have to make their first mortgage payment. Generally, your first mortgage payment is due on the first of the month after you’ve owned the house for 30 days. This gives you more than a month to prepare for the payment. For example, if you closed on your home on June 10, you’ll pass the 30-day mark in July, and your first mortgage payment will be due on August 1.
Even though more than a month may pass before your first bill is due, your first-time mortgage payment should not be more than your typical mortgage payment. The only case in which your payment might be higher than expected is if your property taxes or homeowner’s insurance rates fluctuated.
Should You Make Early Payments
If your lender doesnt charge prepayment penalty fees and you can responsibly afford to get ahead of your payments, it may make sense to start making mortgage payments before theyre due. Paying in advance even by a week can give you a head start on interest, helping you to pay down on your principal sooner.
Read the fine print to see if your lender charges prepayment penalty fees. In many cases, early payments can be worth the effort and the savings on interest.
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Should I Include Projected Repair Costs In My Monthly Payment Calculation
Repair costs arent something that you should include in your monthly payment calculation, but you absolutely should keep them in mind. If the property that you are considering is in need of significant repairs or renovations, then you absolutely will need to consider how you will cover those costs before you sign on to a mortgage on the home.
Can I Make An Additional Mortgage Payment
Making extra mortgage payments is a great way to reduce the lifespan of your loan. All lenders have different policies, but many only allow one extra payment per year. If you make this extra payment, you should ensure that the money goes only toward the principal of the loan and not toward interest.
You could also add extra money to your scheduled mortgage payments. Most online systems allow you to put additional money toward principal on your monthly payment, which can dramatically cut down on the amount of interest that accrues over time.
Making your first mortgage payment is an exciting but daunting task. To avoid late fees and other penalties, you must be absolutely certain of the due date and the grace period. If you have any specific questions about your account or your payment schedule, you should reach out for clarification.
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