Mortgage statements are documents from your lender that provide you with information about your loan. They are useful for staying up-to-date with your payments and providing documentation for audits and tax purposes.
It’s easy to ignore your mortgage statements or to simply give them a glance to find out the balance owed. But mortgage statements contain important information about your loan and are valuable documents to keep on hand for future reference.
Jerry is here to provide all of the information you need about
homeowners insurance and ways to make home ownership more affordable. With that in mind, here’s Jerry’s guide to mortgage statements: what they are and how to understand them.
What is a mortgage statement?
A mortgage statement is a document from your lender that provides up-to-date information about your mortgage loan.
On your mortgage statement, you will find the principal balance, interest rate changes (if your loan is an adjustable-rate mortgage), current payment amount, and your payment breakdown.
Requirements of a mortgage statement
After the 2008 financial crisis, the Consumer Financial Protection Bureau (CFPB) established regulations for what a mortgage statement must contain.
Your lender is now legally required to provide periodic mortgage statements that include the following information:
An explanation of the amount due
Your past payments and transactions
Any relevant partial payment information
Your lender’s contact information
Any relevant delinquency information
Understanding your mortgage statement
Mortgage statements can be confusing. To help you better understand the document, here is a breakdown of each component.
If you want to see a template for a mortgage statement, you can check out
this outline provided by CFPB, or simply google sample mortgage statements.
Here are all of the items that you will find on your mortgage statement:
The bank or company that services your loan will typically be found in the top corner. Here you will find the information that you need to contact your lender including the company name, address, phone number, and address.
Your account number, or loan number, is what identifies your specific loan. If you need to contact your lender about your loan, make sure you have this number on hand.
Payment due date
This is the date by which you have to submit your payment. Many lenders offer a grace period (typically two weeks) before considering your payment late.
Grace period date
As mentioned above, there is typically a grace period for any late payments. This date will be provided on your statement along with any penalty costs.
Principal balance or outstanding principal
The principal is the total amount owed on your loan. Your statement will include how much is remaining on your loan under “principal balance” or “outstanding principal owed.”
While a portion of your payments goes towards lowering your principal balance, a portion also covers the interest on your loan. Interest is the additional cost that you pay for taking out the loan.
If you have a fixed interest rate, then your rate will remain constant over time. However, if you have an adjustable-rate mortgage (ARM), the interest rate can change over time. Your lender will send you an estimate of any changes seven to eight months before the first adjustment.
For subsequent adjustments, your lender has to notify you two to three months before the interest changes.
Mortgage statements will include a breakdown of the current payment and sometimes past payments as well. Payments typically get split between the principal balance, interest fees, escrow accounts (for home insurance and property taxes), and late fees.
Escrow payments go towards an
escrow account that your lender will use to pay loan-related expenses like insurance and property taxes.
Not all loans utilize escrow accounts—if your loan does not include escrow payments, you will need to make the insurance and property tax payments yourself.
This is the date by which your entire loan must be paid off. Maturity dates are not always included in mortgage statements.
Some lenders charge a
penalty fee if you pay off your loan early (for home loans, typically within the first five years). Check with your lender if you intend to double up on monthly payments, pay in lump-sum installments, or otherwise
work ahead of your mortgage schedule.
Your lender may include some additional information, such as instructions for making payments or services and resources available to you.
Additional features to be aware of
Here are some additional features of a mortgage statement that may or may not apply to your loan.
A delinquency notice is issued if you are 45 days behind or more on your payments. However, major credit institutions are typically notified once you fall 30 days behind.
The delinquency notice will include information on how to contact your lender to discuss options for catching up on your loan payments.
This number indicates how much money is in your escrow account. Lenders typically have to make your insurance or tax payments once or twice per year and will store your monthly escrow payments in an escrow account until those dates.
Why you should keep your mortgage statement
There are a few reasons why you should hold on to your mortgage statements. The most common use is for tax purposes. Mortgage statements provide useful proof of payment to help you calculate your capital gains tax and for evidence in case of a tax audit.
Another reason to keep your mortgage statements is to keep track of your payment record. Comparing statements will help you ensure your payments are accurate.
This is especially important if you want to make an extra payment. Some lenders may apply the extra payment to the next month's balance instead of directly to your principal, which means that you’ll pay more in interest.
Do mortgage lenders require proof of home insurance?
Yes, mortgage lenders
require you to have some amount of insurance on your home. The amount of insurance will vary but having your home insured for 100% of its replacement cost is common.
Lenders want to make sure that their investment is protected against catastrophic damage and want to make sure that you are capable of paying down the mortgage even if the house gets destroyed.
Typically, buying home insurance that meets your needs should also satisfy the lender’s minimum insurance requirements.
How to find affordable home insurance
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