Today, we have a story. For twenty years, Eddie had heard borrowers say that whenever they had a mortgage late it was because of an issue with auto-pay. He never fully got it. But, now he does, because it happened to him!
A 30-day late occurs when your lender reports your late payment to credit bureaus. This happens when you’re 30-days past due, which means that it’s been 60 days since your last payment. Simply put, you don’t want to let this happen to you.
So, what happened to Eddie? Auto-pay happened.
Eddie had his mortgage payments set up to be sent from his bank to his mortgage servicer. On March 15th, 2022, he received a payment adjustment notifying him that his payments increased due to taxes and homeowners insurance increases. The issue? It was on paperless billing. He didn’t have a paper reminder that would’ve shown him that his balance had changed. If the mortgage servicer had been requesting the money from the bank, this wouldn’t have been an issue because they would’ve automatically adjusted the amount owed.
On top of that, the reason he didn’t notice initially was that the mortgage servicer was pulling money from an escrow account. But once that ran dry they let him know what was going on. Thankfully, he managed to get this fixed in time. Eddie always made sure to make his payments 1 day early (example, if the payment date was October 1st, he would make the payment September 30th) that way, should anything go wrong, he would have thirty days to fix it.
We believe that there’s a right way and a wrong way to set up automatic payments. When setting up auto-payments, you’re likely going to have at least two options.
We recommend you go with option two: set up payments from your mortgage servicer to request payment from your banks. It might be a little hard to set up auto-pay from your mortgage servicer, but the good news is that they will always know what you owe. Your bank won’t.
You might’ve already guessed the second recommendation, but it’s to not accept electronic paperless billing. The paper bill is a physical reminder for you to review your mortgage payments. If Eddie had opted for this from the get-go, the whole situation would have been avoided.
These might be small adjustments but they can make all the difference and save you a lot of trouble. If you’d like some help estimating your potential mortgage, or have any mortgage related questions at all, you can send us an email at email@example.com. And remember, don’t be late on your mortgage!
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