Automatic payments allow you to set up recurring mortgage payments through your bank. Automatic payments can be a convenient way to make sure that you make your payments on time.
In a bi-weekly payment plan, the mortgage servicer is collecting half of your monthly payment every two weeks, resulting in 26 payments over the course of the year (totaling one extra monthly payment per year). By making additional payments and applying your payments to the principal, you may be able to pay off your loan early. Before choosing a bi-weekly payment, be sure to review your loan terms to see if you will be subject to a prepayment penalty if you do so. Check if your servicer charges any fees for a bi-weekly payment plan. You may be able to accomplish the same goal without the fee by making an extra monthly mortgage payment each year.
An escrow account is an account set up by your mortgage lender to pay certain property-related expenses, like property taxes and homeowners insurance. The money that goes into the account comes from a portion of your monthly mortgage payment. An escrow account helps you pay these expenses because you send money through your lender or servicer, every month, instead of having to pay a big bill once or twice a year. An escrow account is sometimes called an impound account.
Not all mortgages have an escrow account. If your mortgage loan does not have an escrow account, then you pay your property taxes and homeowners insurance directly.
Your servicer may require force-placed insurance when you do not have your own insurance policy or if your own policy doesn’t meet your servicer’s requirements. Force-placed insurance usually protects only the lender, not you. The servicer will charge you for the insurance. Force-placed insurance is usually more expensive than finding an insurance policy yourself.
Foreclosure is when the lender takes back property when the homeowner fails to make payments on a mortgage. Foreclosure processes differ by state.
Typically, if you fall a few months behind on your mortgage payments, the foreclosure process may begin (although the process can begin earlier or later). Don’t wait for the foreclosure process to begin. Reach out for help as soon as you think you might have trouble paying your mortgage.
The foreclosure process generally may proceed in one of these ways depending on your state:
- Judicial foreclosure. This requires that the process go through the court system where the borrower can raise defenses.
- Non-judicial foreclosure. This is done without filing a court action and is carried out by a series of steps, including required written notices under a “power of sale” clause in the mortgage or deed of trust.
Loss mitigation refers to the steps mortgage servicers take to work with a mortgage borrower to avoid foreclosure. Loss mitigation refers to a servicer’s responsibility to reduce or “mitigate” the loss to the investor that can come from a foreclosure. Certain loss-mitigation options may help you stay in your home. Other options may help you leave your home without going through foreclosure. Loss mitigation options may include deed-in-lieu of foreclosure, forbearance, repayment plan, short sale, or a loan modification.
If you are having trouble making your mortgage payments, or if you have been offered and are considering various loss mitigation options, reach out to a Department of Housing and Urban Development (HUD)-approved housing counselor.
You can use the Miss April's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are approved by HUD. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).
Active duty servicemembers may be given permanent change of station (PCS) orders. PCS orders are an official relocation of a servicemember (and any family living with them) to a different duty location. If the servicemember owns a home, they may choose to sell it. If the servicemember owes more on the home than the home is worth, they may have trouble selling their home. Some servicers offer programs to allow servicemembers to sell their home and not have to pay back the rest of the loan balance. Visit servicemember resources for more information.
Refinancing is when you take out a new loan and pay off and replace your old loan. Usually homeowners refinance to try to lower their monthly interest rate and mortgage payment. For example, you might be able to get a new mortgage with a lower interest rate when interest rates fall. When you refinance, you usually have to pay closing costs and fees. Keep in mind that if you refinance with a mortgage that has a lower interest rate, but a longer term, you could end up paying more over the life of your loan. To avoid this, consider a mortgage that has the same or fewer months than are left on your current mortgage.
A reverse mortgage is a type of loan that typically allows homeowners age 62 or older to borrow against the equity in their homes. Most reverse mortgages today are called Home Equity Conversion Mortgages (HECMs), insured by the Federal Housing Administration (FHA). Equity is the amount your home is currently worth, minus the amount of any existing mortgage on your home. It is called a “reverse” mortgage because, instead of making payments to the lender, you receive money from the lender. The money you receive, and the interest charged on the loan, increases the balance of your loan each month. Over time, the loan amount grows. Since equity is the value of your home minus any loans, you have less and less equity in your home as your loan balance increases, which could become a problem if you ever want or need to move. Learn more about .
Your mortgage servicer is the company that sends you your mortgage statements. Your servicer also handles the day-to-day tasks of managing your loan.
Your loan servicer typically processes your loan payments, responds to borrower inquiries, keeps track of principal and interest paid, and manages your escrow account (if you have one). The loan servicer may initiate foreclosure under certain circumstances. Your servicer may or may not be the same company that originally gave you your loan.