How to build equity in your home.
There are many things you can do to uphold your responsibilities as a successful homeowner. Follow these concrete steps for managing your home loan:
Make your home loan payment on time.
You worked hard to buy your home and you don’t want to jeopardize it. To ensure you are a successful home owner, the single most important thing you can do is make your payment on time every month. Late payments can damage your credit rating, and non-payment could lead to more serious consequences. The good news is you have a variety of options available to make paying your home loan more convenient.
- Automatic deduction: One of the easiest ways to ensure your payment arrives on time is to have the amount automatically deducted from your checking or savings account each month. It’s easy to set up, you won’t have to remember to make a payment, and your payments will always be on time.
- Online payments: If you like to manually make payments, you can do so online through your lender’s secure Web site. You can also schedule payments in advance, and have payments deducted from your checking or savings account.
- Mailing payments: Of course, you can still pay your bill the more traditional way, by receiving your monthly statement in the mail and then sending in a payment each month.
Avoid late payments.
Make sure your lender receives your payment on or before the due date. It’s important to understand that the day you mail or bring in your payment may not be the same day the money is applied to your account, so plan ahead to ensure your payment is received at least one business day before it’s due. If your payment is late, you’ll be charged a late fee, which can add up over time. Late payments could also adversely affect your credit rating, so make sure you pay on time.
Make payments early.
To avoid late payment penalties, consider paying early—there are no penalties for doing so. You might also consider making extra payments to help pay down your home loan more quickly. Be sure to specify that any extra payments should be applied to your principal. A simplier way to make extra payments is to add an additional amount to your automatic monthly payment, which can be applied directly to your principal. Making extra payments allows you to save on future interest charges and build up the equity in your home faster. Consult your financial or tax advisor to determine if this is a good strategy for you.
Check your documents.
Always check your loan documents and monthly mortgage statements for errors and omissions. Confirm that the contact information is correct, and that your monthly statements are accurate.
Be sure to budget for taxes and insurance.
Many home loans require you to pay your property tax and homeowners insurance along with your monthly mortgage payment, which your lender then sets aside in what’s called an escrow (or impound) account. Your lender then makes these payments when they’re due. If your home loan isn’t set up with an escrow account for such payments, you’ll need to make these payments on your own, so be sure you budget for these amounts every month and make sure you pay on time.
Contact your lender if you’re unsure how your taxes and insurance are being handled. Also note that in some states, you may receive a supplemental tax bill after your loan has closed, based on a re-assessed home value established from the sales price of the home, which may increase your total monthly payments.
Take action now.
Make sure your payment schedule is convenient and the amount is practical. Set up a system you can count on every month so you’re never late and never miss a payment.
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