How to Avoid Mortgage Management Problems

How well are you managing your mortgage? It’s an often overlooked aspect of home finance – many borrowers assume that once they sign the loan papers, their only remaining challenge is coming up with the mortgage payment each month. But there’s a lot more to it than that.

Having a mortgage is not like paying your cable or electric bill every month. For one thing, it’s much, much bigger – so it has a far greater potential impact on your life. Your cell phone bill you can simply pay and forget each month. But doing the same with your mortgage can be very costly.

There are a lot of serious mistakes that people make by treating their mortgage payment the same as any other bill, although a much larger one. Simply making your monthly payments isn’t enough – your mortgage is a bill that’s in a class all its own and demands special attention.

The following are some of the mistakes people commonly make in handling their mortgages.

Throwing away old billing statements. For most monthly bills, you can throw the old statement away as soon as the new one arrives, or in some cases, after one year. You don’t want to do this with a mortgage.

The reason? Those statements are your only record of the activity on your mortgage account. If your mortgage is sold to another servicer – as frequently happens – those records may not be transferred to the new bank, or may be incomplete. There’s no legal requirement to do so. As a result, you might not be fully credited for escrow payments you’ve made or get stuck with other charges – and be unable to obtain those records from your previous lender, particularly if that lender has failed. Saving your statements gives you a record of all the activity on your mortgage.

Failing to refinance when conditions are right. Although low interest rates generate a lot of interest in refinancing, many people still stick with their same old mortgage through sheer inertia. Remember, if you can reduce your current rate by a full percentage point and plan to be in the home another four years or more, it’s probably worth your while to refinance.

Remember too, that if you’ve been making regular mortgage payments for several years with no late payments on other bills, your credit has probably improved since the time you first took out the mortgage and you may have acquired equity in the property as well (although many homeowners have seen declining equity in recent years). Both will enable you to obtain a better interest rate relative to the market average than you were able to when you first took out the loan.

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