For many Americans who have a mortgage, their house is their primary investment. And just as a home requires routine inspection and maintenance, so does a home mortgage. The Federal Deposit Insurance Corp. (FDIC) provides the following suggestions to manage a mortgage and protect your investment in good times and bad.
For anyone with a mortgage...
Stick to a system for making your mortgage payments on time. Failing to keep current with your payments can be costly in terms of late fees and lower credit scores, which could translate into higher costs when you go to borrow money or purchase insurance. The easiest solution may be to set up an automatic payment plan, in which you give your mortgage lender the authority to deduct your monthly payment from your bank account on a specific day of the month. Or, you can use your bank's online bill pay services to automatically forward routine payments to your mortgage lender. Either way, you can rest assured your mortgage payment will be made on time without you having to remember to do something.
Save receipts; save money on taxes. You may qualify for tax deductions for certain home improvements, such as energy-efficient windows and appliances, or various costs associated with a home sale, a mortgage refinancing or converting a primary home into an investment property.
Build a rainy-day fund. The idea is to have savings you can tap, if necessary, to make as many as six mortgage payments plus your property tax payments when times are tough.
If you're struggling to pay your mortgage...
At the first sign of trouble, ask your lender for help. If you find yourself about to fall behind on your mortgage payment, perhaps the most important thing you can do is to talk to your lender when there's still time to turn things around with your lender's help. Your mortgage lender has as much interest as you do in finding an early solution.
Call the Iowa Mortgage Help Hotline at (877) 622-4866. This state-sponsored mortgage counseling resource provides trusted assistance for Iowans who fear they may not be able to make their mortgage payment. For more information about this free resource, visit www.IowaMortgageHelp.com.
Be on guard against loan modification scams. For guidance, see the FDIC's foreclosure prevention toolkit at www.fdic.gov/consumers/loans/prevention/toolkit.html. In addition, NeighborWorks America has launched a public education campaign at www.loanscamalert.org.
If paying your mortgage hasn't been a problem...
Consider paying off your loan faster. While you may be able to lower your total borrowing cost by refinancing your mortgage at a lower interest rate or switching to a shorter term (for example, from a 30-year to a 15-year mortgage), refinancing can be tougher to do in a "down" real estate market.
However, you have other ways to save money on your existing mortgage, without refinancing. Ask your lender about simple ways to pay off your mortgage faster. By adding a little more money to your monthly payment or sending all or part of your payment in sooner than you're scheduled to, you can repay your loan faster and cut your total interest costs by thousands of dollars over the life of the loan.
Voluntary options for gradually accelerating the payoff of your loan may include increasing your payment each month or sending in an additional mortgage payment each year (13 instead of 12), but be sure to note that the extra payment is to be applied toward principal. Or ask your lender if it offers a bi-weekly or other payment program that would accelerate repayment of your loan, preferably with no fee.
For more tips from the federal government, visit www.mymoney.gov click on "Dealing with Mortgages."
These tips are provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. The IBA serves it members by providing legislative advocacy, training, regulatory compliance and other services designed to enhance the ability of banks to serve their communities. Learn more at www.iowabankers.com.