December 30, 2015

Tips, Bits & Lists: It's a Wrap


On the 12th and final day of tips, bits & lists, we talk about the financial obligations that come with homeownership, starting with the 12 mortgage payments you have to make a year.

Paying Your Mortgage

You'll need to make your mortgage payment, in full and on time, every month.

Why it's important to pay your mortgage on time:

  • You made a financial commitment to your lender to pay your mortgage on time, and in full, every month.
  • Your mortgage is a loan, and being late on your payment – or missing your payment – can have a significant negative impact on your credit score.
  • If your payment is late, you may be charged a late fee – potentially adding hundreds of dollars to your monthly payment.
  • Missing 3 monthly payments can prompt a foreclosure procedure.

If you made a down payment of less than 20% to buy your home, private mortgage insurance or PMI will be part of your monthly mortgage payment.

Property Taxes & Insurance

You are responsible for paying the property taxes and insurance on your home. Depending on where you live and the terms of your policy, these fees could be monthly, quarterly or yearly.  It's important to budget appropriately for them and pay them on time.

If you have less than 20% equity in your home, your lender will likely set up an escrow account for your mortgage. Each month you'll also make an escrow payment to cover your property taxes and homeowners insurance. Your lender will deposit this amount into your escrow account and will pay for both of these items on your behalf when they are due.

How does the escrow work?

  • Lenders will estimate your homeowners insurance premium and real estate property taxes yearly. It's important to remember that it's an estimate, so at the end of the year you may get a refund or have to pay extra for a shortfall.
  • Your escrow payment estimate will be adjusted yearly to reflect any changes in your taxes and insurance premiums.
  • Check your year-end escrow statement carefully to make sure your bills are being paid and there are no mistakes. If you have questions or find a problem, contact your lender immediately as these payments are ultimately your responsibility.

Homeowner Association Fees

If you're among the 20% of America's homeowners who live within a community governed by a Homeowners Association (HOA), it's important that you pay your fees as scheduled – typically monthly, quarterly, or annually. 
HOA fees may cover the following types of services:

  • Trash removal, water and sewage
  • Lawn care for common areas
  • Pest control
  • Maintenance and repair for common areas

When budgeting and planning for homeownership, remember to account for your HOA fees, keeping in mind they can increase each year with the cost of services.

It's important to pay your HOA fees on time and in full. Not only is it part of your responsibility as a homeowner, but HOAs can initiate foreclosure proceedings for non-payment.

Thanks for reading our tips, bits & lists series.  Happy holidays!

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