Many people strive to achieve the American dream of homeownership. Finding that perfect place to call home can be a process, but once completed and you are moved into your new home, it can feel like a great accomplishment. But the journey of homeownership doesn’t end with the purchase. Most homeowners these days take out a loan to be able to purchase a house, and that loan needs to be repaid.
This phase begins with ensuring you keep up with your monthly required mortgage payments in order to keep your home. As a new homeowner, you may be wondering how to make sure you stay on top of your monthly payments. You don’t want to accidentally forget to pay on time or not be able to afford the monthly payments, as this could result in late fees and the potential for foreclosure.
Our home loan experts have a few tips to help you ensure that, once you secure your mortgage and own your own home, you are able to pay off your mortgage on time and in full. From mortgage payment comparison ahead of time to budgeting and utilizing automatic payments, you can achieve financial success.
Before you even start the homebuying process and all of the necessary steps of finding a mortgage lender and searching for the perfect place to call home, you need to know how much home you can afford. So spend some time researching how much money you will need for your monthly mortgage payments.
You can start with an online mortgage payment comparison calculator like this one by Capital Credit Union to compare mortgage payments using different loan amounts to see what kind of payment fits in your financial budget. This will help you ensure you’re able to make your monthly mortgage payments every month and still comfortably stay within your financial means.
Once you have successfully closed on your new home, it’s important to make your mortgage payments on time each month. Missed payments could result in foreclosure and losing your house, and late payments could result in late fees, increasing the amount you pay for your loan overall. On-time payments will help you avoid both of these, and the best way to ensure timely payments is to create a budget that includes your monthly mortgage payments and stick to it. Here’s how:
To successfully make a financial budget, start by analyzing your spending habits. Review a few months of bank and credit card statements, and note how you spend your funds on a weekly and monthly basis. Divide expenses into two categories: essential and nonessential. Essential costs include payments you can’t miss, such as your mortgage payment and utility bills. Nonessentials include more flexible costs, such as entertainment expenses or the price of your morning lattes.
Next, add up all the income for your household. This includes your paychecks, any freelance income, payments from retirement funds or for disability, and so on. Compare this total with your spending needs. Do these amounts balance? Are you over budget or under? If you’re over, are there nonessential expenses you can cut to even things out? For instance, cutting back on fancy coffees could save you upwards of $5 a cup. That savings can add up over a month.
Once you have reviewed your spending habits and income, make an itemized, dated list of all funds coming in and going out, including your monthly mortgage payment. Add a row for savings with a dollar amount you are comfortable with. It’s always recommended to have savings for emergencies, such as home repairs, vehicle repairs, medical needs, and any extra unexpected expenses that may arise.
Make sure that on the due dates for large payments, such as your mortgage, you will have enough money on hand to pay in full. If the timing doesn’t match up, see if you can shift due dates around to ensure you’ll have the cash you need on hand.
Once you have a functional financial budget in place and are sticking to your fiscal plan, it is a great idea to set up automatic withdrawals from your bank account to ensure timely monthly payments for your mortgage. If you prefer to use a separate checking account just for your mortgage payments and set up your direct deposits with your employer so that a portion of each paycheck gets sent to the checking account for mortgage payments while the rest goes to your spending account for the rest of your budget items. This will ensure you have the right amount in your account when your mortgage payment comes around each month.
Another way to ensure you pay the full amount on your mortgage each month is to pay a little extra as you are able to fit additional payments into your monthly financial budget. This can help you get a little ahead in case you slip up one month. Paying extra money each month toward your principal balance can also help you pay off your mortgage early, saving you interest over the course of your mortgage term.
Making biweekly payments on your mortgage each month can help you spread out the amount of money you need to pay more evenly, and each payment will be half of the cost of a full mortgage payment. Having smaller lump sums to pay more frequently can help your finances flow more smoothly, thus helping to ensure you pay your mortgage on time each month. Not only does it help to spread out smaller payments over the course of your mortgage payoff time frame, but it also will add two extra half payments each year, thus saving you money on interest in the long run.
If you are in Wisconsin and looking for a reliable mortgage lender in your area, contact Capital Credit Union today. We can help you with mortgage payment comparison and planning your budget so you can make your mortgage payments on time, every time.