How to Efficiently Pay Your Mortgage
The term “mortgage” is a 13th century Middle English word imported from Anglo-French: “mort” is French for death, and “gage” means pledge in Latin. In early Anglo-Norman law, property pledged as security for a loan was usually held by the creditor who could farm it and sell the proceeds — a sneaky form of interest in an era when lending for profit was considered a form of sinful usury. When the debtor finally couldn’t stand watching his wealthy creditor get even richer off his mortgaged land, he found a way to pay off the debt. If he couldn’t find the cash by the time he died, the land would become the creditor’s. Hence the name “death pledge.”
In those days, peasants could pay their debts many ways. Money was scarce, so lenders settled for livestock, crops, handmade items like furniture and forged tools. Today’s borrowers don’t accept goats or swords when mortgage payments are due, just money. However, that money can come in the form of a personal check, a certified check, a pile of paper bills or even 50 Mason jars full of accumulated pocket change.
From Goats to Gigabytes
To the delight of today’s lenders, electronic banking revolutionized the monthly chore of making mortgage payments. They no longer have to wait for the postal service to deliver your monthly check. Now you can send your payment electronically in seconds. Delinquencies and defaults are down and lenders’ profits are up as banks get their hands on your cash many days, even weeks earlier, than they did in the snail mail days.
Automatic payments were the breakthrough that revolutionized how Americans paid their mortgages. Borrowers no longer have to worry about making their monthly payments on time because their tech-savvy lender can relieve them of that burden. They also don’t have to worry about forgetting to make their mortgage payments on time so that they can concentrate on earning the next month’s payment. Automatic payments sped up the receipt of mortgage money from days to seconds, but they have also virtually erased risk from the business of servicing mortgages.
Tips on Paying Your Mortgage
- Don’t use a credit card. Putting an expense as large as a mortgage payment on a credit care is not a good idea. It will destroy the utilization rate on your revolving credit card balances, which could severely impact your credit.
- Take out a small personal loan if you are temporarily short on cash. A personal loan of $5,000 or $10,000 won’t do much damage to your credit rating.
- Don’t get late on your payments. If you are late on a payment the majority of mortgage companies do not asses a late fee until a payment is more than 15 days past due. At 30 days past due lenders are allowed to report a late payment to the credit bureaus.
- Don’t panic if you miss one payment. If you know you’re going to be late or have trouble making a mortgage payment, don’t panic and don’t get into denial. The penalties for not paying your mortgage worsen as time passes. Go over your budget carefully and cut excessive spending. If your income can’t keep up with your expenses, consider a second job. Do all that you can to avoid repeating a delinquent payment. Becoming late on payments can have a far-reaching impact beyond your mortgage.
- Communicate with your lender. If you think that you will have a chronic problem making timely payments, call your loan servicer and explain the situation. They may be able to help you work out alternative arrangements.
- Take steps to avoid future delinquencies. You have to take action in restoring your lender’s confidence in you once your finances are in order. Seriously consider making automatic payments. It will make things easier for you and your loan servicer.