A loan servicing company is responsible for the day-to-day management of your mortgage. This includes collecting and crediting your monthly loan payments and managing your escrow account.
Homebuyers are often surprised to learn that the lender they so carefully selected when taking out a mortgage may sell the rights to service their loan to another company. They may also sell the loan itself. If you have questions or problems with your account, you must work with the loan servicing company, not the (new or original) lender.
Because companies may sell loans and/or servicing rights multiple times, you may find yourself working with and sending payments to several different servicers during the life of the loan. Your lender must provide you with a loan ownership transfer notice if it sells your mortgage. The loan servicing company must send contact and payment information to you within 15 days of the effective date of transfer.
Not all lenders sell their loans. Many credit unions, including Navy Federal, service their loans for life. This gives you consistency in payments and provides a reliable point of contact whenever you have questions or issues.
Before you sign your mortgage documents, you should check to see whether the lender typically sells their loans. The lender must disclose this on the mortgage documents. Regardless of how often your loan servicer changes, the terms of your loan won’t vary from the original agreement you have with your lender.
Not all lenders sell their loans. Many credit unions, including Navy Federal, service their loans for life.
Lenders typically report late payments to credit bureaus when you’re 30 days past due on a payment. Being late for any payment—mortgage, car loan, student loan or credit card—can negatively affect your credit score. If circumstances arise that make it difficult for you to keep up with your mortgage payments, you should reach out to your lender or loan servicing company. There are a variety of programs that may be available to help you resolve your delinquency. The right option for you depends on your individual situation and whether the issues affecting your inability to make timely mortgage payments are temporary or long term.
A smart way to make sure you never miss a payment and aren’t late paying your mortgage is to set up monthly automatic payments. There are several ways to do this. You can schedule a recurring electronic debit by providing your lender with your bank routing and account information or your debit card information, and your lender will withdraw the funds monthly from your checking account. In some cases, but not all, you may be able to provide your lender with a credit card, so you can charge your monthly payments to your card while simultaneously accumulating cash back, travel and other perks. (Check with your lender to see if this is an option.) Or, you can set up a recurring payment to your lender through the online bill pay service your bank or credit union offers.
You can make payments before they’re due or pay more than the amount due each month. To pay off your loan faster, make sure your lender knows the extra funds shouldn’t be applied to future payments. You can cancel automatic payments or change the payment amount or payment date by contacting your lender or editing your scheduled bill payment request online.
When you set up automatic payments, it’s important to make sure you have the funds in your account each month to cover the withdrawal on the payment date. Otherwise, you could overdraw your account and incur overdraft and late payment fees. If you’re paying with your credit card, make sure you pay off your balance each month to avoid interest charges on top of the interest you’re paying on your loan.
Additional Principal Payments
When you make extra payments toward your loan principal, more of your future payments can be directed toward principal—saving you money and helping you pay off the loan faster.
To do this, you may need to specify to your lender that you want the additional funds to go toward the principal. Otherwise, the lender will apply the funds to future interest payments, which won’t lower your loan principal. Make sure the additional funds go toward principal by talking with your lender about the best way to make a principal payment.
You may have to follow up with the lender each month to make sure they apply the extra payment to the loan principal. Unfortunately, not all lenders allow principal-only payments.
Use this loan payoff calculator to determine how much money you can save by paying more toward the loan principal.
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