The Key to Managing Your Mortgage

thekey

to managing your Mortgage

By Dwayne Berbick

“Buy a house”, they said. “You’ll enjoy the independence of having your own home”, they also said.

And they were right.

Homeownership comes with responsi-

bilities – some very big ones, and some small ones, that if not managed properly, can ruin the joys of being a homeowner. I remember waking up one morning and the faucet in my shower broke. I asked around for a plumber, made the call, and in a jiffy, it was fixed.

Then it hit me!

There was no landlord that I needed to advise about the repair. The repair wouldn’t be taken from my rent for the month. This was now my responsibility: not the vendor I bought the property from, not the developer, not the mortgage institution, but mine and mine alone. When it comes to purchasing a home, we often begin at the end, i.e., enjoying the actual home. However, enjoying it means proper maintenance. Your biggest maintenance project begins with ensuring that you make your mortgage payments on time, and in full.

Mortgage 101: What it is and how it works

A mortgage is the loan that you would use to purchase or maintain your home, land or other real estate. It’s calculated based on your ability to repay. A mortgage with the NHT generally considers your age, income and the applicable interest rate.

Once that’s established and you’ve made your purchase, your monthly mortgage is calculated.

Paying your mortgage on time and in full, ensures you avoid late fees.

Your mortgage has four components:

1. The principal

2. The interest

3. Life Insurance

4. Peril Insurance (not calculated for House

Lot or Serviced Lots)

Typically, your mortgage payment is due on the 1st business day of every month. You must pay your mortgage in full by the due date. Paying your mortgage on time and in full, ensures you avoid late fees. If you’re making your mortgage payment late, when next you pay your mortgage, you should expect to pay a late fee and the regular amount that is currently due. When you make a payment, your loan balance is reduced. As a result, your interest charge will also be reduced over time.

Missing your mortgage payments can have serious consequences.

Bear in mind that after 30 days of not receiving a payment, most mortgage providers will commence recovery proceedings. Generally, this starts off with payment reminders. Be sure to act on those because after 90 days, further action will be taken. That action could ultimately result in the loss of your home.

However, all of this is avoidable. If you’re having challenges making your payment, let your mortgage institution know. Don’t avoid the reminders as there are different arrangements that exist to help you. These initiatives have been heightened since the COVID-19 pandemic.

Therefore, if you need help with your mortgage

payments, reach out and take advantage of the offerings.

The NHT specifically offers up to a two-year moratorium to mortgagors who are having difficulties making their loan payments. Other options include loan rescheduling. This gives you more time to repay the loan and therefore have smaller (and more manageable) monthly payments. Adjustments in interest rates, or a hybrid loan modification option, ensures that all parties are comfortable.

Sale of the property to recover the loan is always a last resort and only happens where the mortgagor shows a lack of interest in addressing their arrears.

Good financial planning, as a homeowner, begins with preempting your rainy days.

Because life is uncertain, if you ever find yourself in a position where you can make a lump sum payment on your mortgage, do so. Let your mortgage institution know as well that this was your intention. Some institutions, like the NHT, will apply that amount directly to your principal. Otherwise, it will be treated as a pre-payment and you won’t benefit from reduced interest charges. Also, if your circumstances change for the better and you can make more than your monthly payment, do so. Once again, let your mortgage provider know, so you can benefit from a reduction in your principal. Now with that out of the way, here are three

financial tips that I think every homeowner should practice.

1. Build a rainy-day fund.

Have some savings you can tap, if necessary. The total should be about three to six mortgage payments, plus your property tax payments. This fund can also be used for urgent property repairs that may arise.

2. Plan your budget

Budgeting should begin before you purchase the house. Know how much you’re comfortable paying each month. Just because you qualify for a particular amount doesn’t mean that you should take out a loan for that amount. Ensure that you consider all your expenses: food, clothing, insurance, and other household expenses, like gas, electricity, water. Plan and exercise the financial discipline to adhere to your budget.

3. Don’t overspend or over borrow on unnecessary repairs or improvements

Many new buyers scrape up every dollar that they have in order to get that purchase completed. Unfortunately, some of them borrow additional money to buy new appliances and furnishings or undertake unnecessary cosmetic changes. Pace yourself when planning and implementing renovations on your property. It’s a journey, not a sprint.

And remember, this is your home now. Whether it works out as an investment or a liability will heavily depend on the financial decisions you make from day one.