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How to read a mortgage statement

Monthly mortgage statement

A mortgage statement provides essential information about how your monthly loan payments are used. Most borrowers receive a statement each month.

The look of these statements changed in January 2014, when rules issued by the Consumer Financial Protection Bureau went into effect. These changes were a direct result of the 2008 financial crisis.

The number of borrowers needing help to cover their mortgage each month accelerated rapidly — too fast for the mortgage servicing industry to keep up. Nearly 9.3 million homeowners sold short, received a deed in lieu of foreclosure or were foreclosed on between 2006 and 2014.

The Dodd-Frank Act both imposed new conditions on mortgage servicers and gave the CFPB the power to create additional requirements. The CFPB’s new rules were designed to improve the information given to borrowers, set up baseline servicing requirements and upgrade consumer protections in terms of mistakes made by mortgage servicers.

The CFPB has created a sample mortgage statement on its website, which we’ve adapted in the image below to help explain some of the nuts and bolts of your monthly mortgage payment.

Each number in the graphic corresponds to an item in the list below.
Sample Mortgage Statement

#1 Mortgage servicer information

First up on your statement will be information about your mortgage servicer. This is the company that sends your mortgage statement (or coupon book) and handles the payments. The company’s name, address and phone number are displayed here. Use this contact information if you have any questions about your mortgage.

#2 Loan number

This identifies the mortgage as yours. Should you have a question or an issue, give this number to the customer service representative.

#3 Payment due date

This is just what it sounds like: the day by which your mortgage payment should be received. Generally speaking, there’s a grace or courtesy period – usually two weeks – before your payment is considered late.  Check out what happens if you miss a payment here.

#4 If received after (date)

This is the day after the end of the courtesy period, at which point a late fee will be due. It’s generally grouped along with the payment due date and the amount due.  

#5 Outstanding principal

The principal is the amount you originally borrowed. The part of your monthly payment that goes to principal is going toward repayment of the actual loan. Different lenders identify the principal in different ways, such as “outstanding principal” or “principal balance.” This is how much of your original principal balance you have left to pay.

#6 Interest rate

Interest is the cost you pay to borrow the money. Thanks to the amortization process, most of your early mortgage payments will go toward your interest charges, rather than you principal. If you have an adjustable rate mortgage (ARM) the interest rate could be adjusted, or reset, over time. Those with mortgage terms of more than one year must be sent an estimate of the new payment seven to eight months before the first adjustment. If your ARM has previously reset, then the mortgage servicer must notify you two to three months before the next adjustment.  Knowing that a rate reset is coming gives you a chance to shop around for a better mortgage.

#7 Escrow payment

Escrow is the part of your mortgage payment that goes toward mortgage-related expenses, such as property taxes and homeowners insurance. Although these payments are typically only due once or twice a year, some mortgage servicers require you to pay monthly installments into an escrow account because it ensures these expenses will be covered. The lender itself makes sure to pay those expenses for you by using your escrow fund.

However, not every mortgage payment includes escrow. If your lender gives you the option to pay these expenses yourself, you’ll need to budget for these monthly expenses.

#8 Escrow balance

You’re sometimes required to keep a certain amount of money in this account, since mortgage-related expenses can change; for example, property taxes could rise in your area. The minimum cash cushion may be as much as two months’ worth of escrow payments. Most lenders send a “yearly escrow analysis,” separate from the mortgage statement. If there’s a surplus of $50 or more in the escrow account, or if there’s not enough money, this document will include either a request for additional payment or a check for the extra money.

#9 Maturity date

The maturity date is the date when your mortgage loan must be paid off. However not all servicers include this information on the mortgage statement. The maturity date might be identified in another way, such as “contractual remaining term.”

#10 Prepayment penalty

Some lenders charge you a fee if you pay off your mortgage before the maturity date. This is something you would have agreed to when you took out the mortgage. According to the Consumer Financial Protection Bureau, this penalty is normally applied when you pay off the entire balance in a certain number of years (usually three or five).  

Prepayment penalties do not generally apply when you make extra principal payments in small monthly amounts. However, the CFPB suggested checking with the mortgage lender to be sure. If you’re considering a mortgage refinance and your current agreement has a prepayment penalty, be sure to factor this in the total cost of refinancing.  

Other information

Read your mortgage statement each month, watching for issues such as overdue or delinquent payments, or late charges mistakenly applied. Contact your lender immediately to dispute any errors.

A mortgage statement can include other important information, depending on your circumstances. For example, if you were or someone in your household was on active military duty (or some kind of related active service), you might be able to receive benefits and protections under the federal Servicemembers Civil Relief Act.

When is a mortgage payment considered late?  

Strictly speaking, your payment is “late” if you don’t pay it by the due date. As noted above, you’ll usually get a two-week grace or courtesy period. Fail to pay your mortgage by the end of that time frame and you’ll be charged a late fee.  

Once your payment is 30 days late, a mortgage lender will generally report this to the credit bureaus. A late mortgage payment does more damage to your credit score than other types of late payments, which could affect your eligibility for refinancing or a new home loan later on.  

How to make a mortgage payment  

The simplest way is to pay online through your loan servicer website. Think about setting up automatic payments. Doing so will make sure your payments are always received promptly.  

Mailing a check? Allow enough time before your mortgage due date, and keep in mind that holiday mail volume or weekend mailing could delay your payment by a couple of days (or more). If you’re close to the due date or the end of the grace period, get a receipt from the post office or consider using next-day delivery.

Ask for a receipt, too, if you drop off your payment at a local lender. The law requires lenders to credit a payment the day it is received, so if you’re charged a late fee then the receipt will prove you paid on time.

 

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