Congratulations if you are one of the folks who already has a mortgage and you don't plan to move soon. The stress of moving and sweating out loan approval are now just a faint memory. You have been enjoying your new status as a home owner, your neighbors, and all the advantages that property ownership brings you. But you aren't off the hook yet-there are still a few things you need to remember. Here are some pointers to take you into 2014:
1) Always pay your mortgage on time. That should go without saying-but I am saying it. If you have even a single 30 day late payment on your mortgage your credit score will drop significantly and you will be in a situation that if you need to do something with your mortgage ( let's say sell due to an unexpected job relocation) you won't be able to obtain new mortgage financing until you have paid on time for twelve months from the most recent late payment. I have run into that issue on numerous occasions with folks who wanted to take advantage of the historically low interest rates last year and I was unable to help them. So if you find yourself in a cash flow pinch (and it happens to the best of us from time to time) pay your mortgage first and let the credit cards go late. If there is no other choice, and you must pay your mortgage late, contact your lender and work out a solution with them if you can. It will still impact your credit as your lender will report the late payment-but they may not send you to foreclosure immediately.
2) Don't forget that the interest you pay on your mortgage is tax deductible. Be sure to take this interest deduction on your taxes. For most Americans this is the single biggest tax deduction available to them. (You property taxes are deductible too-so remember that as you begin working on your taxes.)
3) While we are on the subject of taxes-did you buy your home this year? Did you pay points for your mortgage? The cost of any discount points is also tax deductible.
4) Give me a call for a mortgage check up. Many people would benefit from equity building by refinancing their loan into a shorter term. If you think you would like your home paid off by the time you retire moving from a 30 year amortization into a 15 year amortization will pay off in the long run. You will save thousands of dollars in interest as well as retire a large debt more quickly.
5) Are you paying mortgage insurance on a conventional loan and do you think you have a 20% equity position? Maybe now is the time to take a look at the value of what you own VS what you owe and refinance your current mortgage to eliminate the monthly mortgage insurance. If you are in an FHA loan and your credit scores have increased to over 680, you too might take a look at refinancing into a conventional loan to eliminate the mortgage insurance.
6) Doubling up on a mortgage payment does not mean you can skip a payment. Your payment is always due at the first of the month even if you have paid more than what is owed in your last payment. Payment tracking is highly computerized. The computer, while recognizing the amount of the payment and lowering your balance doesn't recognize that this means you will be skipping a payment. You will be reported late. You can always pay more against the principal balance. Normally on most payment coupons there is a box so you can indicate you are doing just that.
7) If you prefer not to refinance to build equity, you can do it yourself by paying additional principal. By making one extra principal payment per year, you will not reduce your monthly payment but you will reduce the number of payments you will incur prior to paying off your loan. You will no doubt be offered the opportunity by your lender to make your payment bi-monthly. You pay the same amount per month but it is divided in half. This has the same affect as making an extra payment per year because you will make 26 half payments per year. This is a great tool if you don't have the discipline or you don't remember to make that one extra payment.
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