Where Your Monthly Payment Goes
Every month you make a payment to your lender to pay back the money that you borrowed to purchase your house. This payment consists of principal and interest and will include escrow (to pay your property tax and homeowners insurance) and mortgage insurance if you have them. Your mortgage statements will show you how all of the money is divided amongst those categories and how much went to each. In the beginning stages of the loan, most of the payment will go towards interests, however through the life of the loan you pay less in interest and more to principal each month.
If you have an escrow account, the amount applied to your payment will depend on how much you are actually paying in property tax and homeowners insurance. Each year, your lender is required to analyze your escrow account to make sure that they are collecting enough, and not collecting too much. By law, they are only allowed to hold an extra two months in reserves. If the balance is in excess of two months when they conduct the analysis, plus whatever you are expected to have to make the necessary payments, they will refund the difference to you.
When will my first payment be due?
This is one of the most asked questions that is asked by borrowers. The first payment on your new mortgage loan will not be due for up to two months following your closing. Mortgage loans become due on the first day of the month generally. So if you were to close on May 5th, you would have to pay the per diem interest through May 31st. Your first payment for June will then be due on July 1st. This can be very confusing for some, reach out to your loan officer to verify and explain when your first payment will be.
If You Miss a Mortgage Payment
There is typically a grace period that you can make your payment without penalty which is usually 14 days. If you fail to make the payment within the grace period, you may have to pay a penalty and/or late fees.
What should I do if I am going to miss a mortgage payment?
It is important to reach out and notify your lender as soon as you know that you are going to miss a payment. Missing multiple payments can hurt your credit score and cause a default on the loan that you could wind up losing your house. Most lenders have programs, or payment plans, that can help you if you are experiencing a hardship so that you can avoid foreclosure.
Why Choose Homewise Financial?
- Application process is completely online.
- Loan specialists available to answer your questions and help you understand the process.
- As a mortgage broker, we have exclusive access to a vast network of lenders to offer competitive rates and diverse loan programs to suit your goals.
- Personalized experience. We will “hold your hand” through the process to ensure your comfortability with the loan program and process.