How To Pay Your Mortgage: We Answer Your Questions

Posted On August 18, 2021

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by Miranda Crace

The good news? You’re not alone! We compiled some of the most common issues and questions we deal with as well as a list of common mistakes you may not even realize you’re making. Read on to get the information you need so that you never have to think about the mechanics of your mortgage payments again.

The 5 Most Common Mistakes Borrowers Make

Technology has mostly made bill paying easier, but it takes a bit of effort to set it up correctly. Also, keep in mind that old communication methods might no longer be effective.

Sending In Extra Money Without Explaining What It’s For

Rocket Mortgage® won’t complain if you send in extra money, but we aren’t mind-readers, which can make it tricky when you send in extra money without telling us what it’s for. There are a few possibilities – prepaying before vacation, paying down your principal or adding money to your escrow account. Without your guidance, it’s just a guessing game for us, but you might not be pleased if our guess is wrong. Your best bet is to check your lender’s website to find the best ways to contact them directly.

Rocket Mortgage is unusual among lenders in that we keep much of our mortgage servicing in-house. We want our customers to experience the same great service they received during the application process for the entire term of their mortgage. You can contact us by mail, email, phone, mail, or by just chatting with us online.

Putting A Note In The Memo Section Of Your Check

Back in the day, you could leave a note on the memo line of your check and expect the check’s recipient to see it. That is no longer true. Because checks are processed electronically these days, the payee might never see that memo line. You may think you’ve explained how you want your money to be allocated, but it’s possible we haven’t received the message.

Putting A Note In The Memo Section Of Your Check

Back in the day, you could leave a note on the memo line of your check and expect the check’s recipient to see it. That is no longer true. Because checks are processed electronically these days, the payee might never see that memo line. You may think you’ve explained how you want your money to be allocated, but it’s possible we haven’t received the message.

Forgetting To Add Your Loan Number On Your Check

Maybe you have multiple loans with your lender, or maybe a family member is paying on your behalf for a month. Either way, it’s best to include the loan number that you’d like the funds to go to, because, unlike notes on your check, whoever is collecting your payments will be able to use that information to correctly apply your payment.

It may seem like we’re contradicting ourselves, but automatic check readers – often using artificial intelligence – are programmed to pick up account numbers so that they can apply payments correctly.

Using A Bank Deposit Slip Instead Of An Actual Check To Make A Payment

You’re giving money to, not taking it from, your mortgage. When setting up recurring drafts or making a payment, you should always send a check, not a deposit slip.

Not Understanding The Difference Between Recurring Payments Through Your Lender And Bill Pay Through Your Bank

At Rocket Mortgage, you can set up recurring mortgage payments (sometimes called auto draft or autopay) or set up automatic bill payments through your bank. Make sure you’re clear on which one you’re using.

If you set up recurring payments through Rocket Mortgage, we will draft (pull) your monthly payment. If you have online bill pay, your bank sends the money every month. A problem occurs if your payment changes for any reason (typically due to an increase in escrow, often caused by a change in taxes and/or homeowners insurance).

Your online bill pay will not know about the change, making your payment either under or over the correct amount. But, with a recurring draft, Rocket Mortgage will account for the payment change and collect the right amount of money.

Mortgage Payment Tips

If you read the above, those pro tips could be boiled down to that cornerstone of all good relationships: communication. But let’s look at them in a little more detail.

  • Recurring payments: If you haven’t already, think about setting up recurring payments. If your mortgage is with us and you’re set up for recurring payments, your payment will never be late or short. A mortgage payment can change if your escrow payment – taxes and insurance – changes. It can also change if you have an adjustable-rate mortgage (ARM).
  • Paying ahead: If you’re going to change your payment pattern like if you’re prepaying before vacation, call your lender and explain your payment. You can also make your next payment online ahead of time as long as your payment for the current month due is already made.
  • Double-check: Verify with your bank that your funds have actually been taken out of your account. It can take up to a week for funds to be taken from your bank account. Keeping this in mind could help prevent a possible overdraft.
  • Update: Lastly, if you refi and prefer to use online bill pay through your bank, make sure you update your new payment amount and loan number. We do everything we can to make sure we apply your payment to the new loan, but verifying you are giving us the new and correct information up front will ensure a seamless transition.

How To Pay Your Mortgage FAQs

Why should I pay extra?

You have to repay your principal and interest, but most lenders will offer or require you to make extra payments into an escrow account to cover costs for your homeowner’s insurance, property taxes, and private mortgage insurance or FHA mortgage insurance premiums. For most homeowners, this is a huge convenience that prevents them from getting hit with an expensive annual bill at the worst possible time.

Escrow

If you know your property taxes are going to go up, or that your homeowner’s policy is about to get way more expensive, you might want to put more money into your escrow account so that you don’t get hit with a shortage later. If you overpay escrow, don’t worry. Overages will be returned to you after those bills are paid.

If your taxes and insurance do go up, the amount you are required to pay for escrow will still go up the next time your servicer conducts an escrow analysis. However, you’ll avoid having to pay back a shortage based on not having enough money in your escrow account on top of that payment change.

Paying Off Your Debt

You don’t have to, and you shouldn’t strain your monthly budget or go without to do it, but for many homeowners, paying off their mortgage is a prerequisite to enjoying their golden years of retirement, and they want to do it as soon as possible. If you don’t have a big monthly mortgage payment weighing you down, retirement could come at age 50 instead of age 70 or later.

Another big benefit to this is that you can pay thousands less in interest by paying off your mortgage ahead of your term.

Principal vs. escrow: Which is more important?

As always, the answer depends on a number of factors, including your goals and philosophy toward debt.

Team Escrow

If you have an escrow account, you pay into it every month so that when it’s time to make a property tax or insurance payment, you’ve got enough money saved up. Property taxes can change sometimes, which will make your monthly payment change as well.

Some people like to pay extra into their escrow to make sure they don’t get an unpleasant surprise later on. Then, if you happen to overpay your escrow account, you’ll get an overage check from your lender so you’re not losing any money in the long run.

Team Principal

The other common reason to pay extra is to pay off your mortgage faster. An amortization schedule is the schedule of payments that you would have to make for the term of your mortgage to pay it off, or amortize, your loan at the end of the term. If you pay more than the minimum amount, your mortgage will amortize faster, which will get you out of debt and could save you thousands of dollars in interest.

You can use the Rocket Mortgage Amortization Calculator to see how different payment amounts would help pay off your loan sooner, and how much interest you’d save in the process.

Other Strategies For Paying Off Your Mortgage

You may not have much extra to pay each month, but you might be able to pay a little simply by rounding your payment to the nearest dollar.

Maybe you got a raise, end-of-the-year bonus, or tax return check, and you want to make an extra one-time payment. Not a problem. We’ll apply it according to your instructions.

Can I make my monthly mortgage payment with a credit card?

As a general matter, we do not accept direct credit card payments for your mortgage payments. There are a variety of reasons for this, all having to do with lenders’ and credit card companies’ policies.

What if my mortgage servicer keeps changing or is not providing good service?

The mortgage industry is heavily regulated, and servicing is no different from its other components. The Federal Trade Commission regulates this part of the picture and offers a statement of borrower’s rights and responsibilities when it comes to mortgage servicing.

The Bottom Line: Communication Is Key To Successful Mortgage Servicing

Whatever your wishes are, most lenders are happy to carry them out. Just let us know what they are. A simple phone call or email can prevent problems before they cause bigger issues. Need to talk to us about an upcoming payment? Our Home Loan Experts are here to help.

Want to make sure your mortgage is serviced by the same company you chose for your mortgage? Get started on your mortgage application today.

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