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Know your mortgage statement

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Another month, another mortgage statement. Before you disregard this confusing piece of paperwork, you may want to take a closer look. Knowing your mortgage statement is a vital component of keeping up with your mortgage loan. This document may look detailed and complex, but it’s simple to understand once you break it down. 

What is a mortgage statement?

A mortgage statement is a document that is sent from mortgage servicers to borrowers every month. This statement includes relevant and up-to-date information regarding the borrower’s loan, including loan principal, interest rates, payment breakdowns, and escrow accounts. To make things easier on borrowers, the federal government requires mortgage servicers to follow a standardized format for mortgage statements. 

Why you need to know your mortgage statement

If you’re trashing your mortgage statement every month without a second thought, you’re not doing yourself any favors. Your mortgage statement includes important detailed information and updates about the status of your mortgage loan. 

For instance, say you have an adjustable interest rate that has increased. You will not know about this increase ahead of time unless you read your mortgage statement. Another example relates to escrow payments. Say your property taxes have gone up, and you will need to put more money into your escrow account to cover this increase. Again, you will not know about this change unless you look at your mortgage statement. 

Closely scrutinizing your mortgage statement every month can help you identify potentially costly errors and correct them before it’s too late. And finally, keeping up with your mortgage statements helps you keep up with your loan. For instance, if you’re falling behind on your payments or are incurring late fees, you can be proactive about these issues by contacting your mortgage servicer for assistance. 

Relevant information on your mortgage statement

It’s easy to get confused or overwhelmed when you first open your mortgage statement due to the sheer amount of information included. However, when you break it down one section at a time, understanding your mortgage statement is well within reach. 

Mortgage servicer information

The first thing that you will see on your mortgage statement is your mortgage servicer information. This will include the company name, address, website, and phone number for more information or contact customer service. However, you should keep in mind that your mortgage servicer isn’t necessarily the same thing as your original lender -- so don’t be confused if you see an unfamiliar company name here. 

Account number

The second thing that you will see on your mortgage statement is your account number. This account number will come in handy when it comes to managing your loan. For instance, if you need to make a payment online, you will need this information. Additionally, if you contact your loan servicer for a customer service-related question, they will likely ask for this information as well. 

Payment due date

The third thing that you will see on your mortgage statement is your payment due date. This is generally the same date every month and was agreed upon at closing. It’s extremely important to carefully note this due date and submit your mortgage payments on time every month without fail. 

Late payment date

Although you’re given a due date, many servicers offer a “grace period” for mortgage payments. This timeframe will be listed in this section. For instance, your servicer may provide you with a two-week grace period, as this is standard in the industry. If your payment is not received by that date, you will be required to pay late fees. 

Outstanding principal amount

The next thing that you will see on your mortgage statement is your outstanding principal amount. The principal amount on your loan is the amount that you originally borrowed to purchase the property. While you may think that you simply add up the payments you’ve made so far and subtract them from your original principal, that’s not exactly how it works. 

This is because you’re also paying interest on your loan. Depending on the exact structure of your loan, many of the initial payments you make could be going toward interest rather than principal. In any case, your mortgage provider will include that information on your mortgage statement, so you know how much you still owe. 

Interest rate

Another number that you will see on your mortgage statement is your interest rate. As you now know, interest plays a huge role in the repayment of your mortgage. If you have a fixed-rate mortgage, your interest rate will remain at the same rate that you initially agreed upon when you closed on the property. If you have an adjustable-rate mortgage, then your interest rate may change over time based on market conditions. No matter your mortgage loan type or interest rate, it’s important to be aware of this information on your mortgage statement.  

Current payment breakdown

A particularly valuable piece of information on your mortgage statement is your current payment breakdown. This section breaks down the different sections of your mortgage payment between principal, interest, and escrow. Escrow accounts are used to collect property taxes and homeowners insurance premiums every month instead of paying a larger lump sum once a year. These three components together make up the totality of your monthly mortgage payment. 

Escrow payments

Speaking of escrow payments, there’s a separate section on your mortgage statement dedicated to these expenses. This payment option covers home-related additional expenditures that may be difficult to budget for on your own. Many lenders include escrow accounts, but you will need to personally account for these expenses throughout the year if yours doesn’t. 

Loan maturity date

Another thing that is included in your mortgage statement is your loan maturity date. This is the date by which you must pay off your entire mortgage loan. This date depends on the term of your mortgage -- the most common options being 30 years and 15 years, respectively. 

Prepayment penalties

Thirty years is a long time to pay off anything. For that reason, you might wonder if you’re able to pay off your mortgage early by contributing extra money on top of your regular monthly payments. Some lenders charge what they call a “prepayment penalty” -- a fee for paying off your mortgage early. If you’re considering repaying your loan ahead of its maturity date, make sure that you familiarize yourself with your lender’s specific terms and conditions. 

Important messages

The last and final section on your mortgage statement includes any important messages from your loan servicer. Be sure to closely monitor this section for relevant messages that may require action on your part. 

What to do if you find an error on your mortgage statement

While you may assume that everything on your mortgage statement is accurate and correct, it’s important to carefully check it over for errors because they occur from time to time. If you do find an error on your mortgage statement, here’s what you should do to dispute or correct it: 

  • Call your loan servicer right away using the information provided in the first section. Some mortgage statement errors can be resolved over the phone, while others may require further action.
  • The best way to dispute an error on your mortgage statement is in writing. Send a letter to your loan servicer’s address and include your full legal name as it appears on your mortgage documents, your home address, your mortgage account number, and the date. Then identify and describe what the error is.
  • Mortgage servicers then have 30 business days to respond to your inquiry or inform you in writing that they need another 15 days to investigate and adequately respond.
  • If your mortgage servicer isn’t responsive or cooperative, you can file a complaint against them with the Consumer Financial Protection Bureau. 

How to work with your lender if you're having issues paying your mortgage

One of the main benefits of knowing your mortgage statement is keeping up with your payments and being proactive about any payment issues before you end up having to miss a payment. If you notice based on your mortgage statement that you’re having problems paying it off in an agreed-upon manner, here’s what you should do to work with your lender to find a solution:

  • The best thing to do is to contact your lender before it’s too late and you miss a payment. For instance, if you lose your job and you aren’t sure how you’re going to make next month’s payment -- reach out right away for the best options and results.
  • Reach out to a HUD-approved homeownership advisor or housing counseling agency. A database of HUD-approved resources can be found on the HUD website.
  • If you’re having major problems making your mortgage payments, you may want to contact a foreclosure prevention specialist. HUD also has information about foreclosure avoidance counseling on its website. 

Final rundown on mortgage statements

Keeping up with your mortgage statements is a key component of responsible homeownership. Keep in contact with your lender and servicer along the way about any questions or concerns you have. And as always, feel free to reach out to the lending experts at Vaster Capital with any and all of your mortgage questions. 

 

Sources:

  1. Escrow Definition | Investopedia
  2. So, How Do I Submit a Complaint? | Consumer Financial Protection Bureau
  3. HUD Approved Housing Counseling Agencies | US Department of Housing and Urban Development

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