Every month when your mortgage servicer sends your mortgage statement, it contains a lot of information in addition to the amount of your next payment. At first glance, all of the information may seem complex and overwhelming. Understanding the information on the mortgage statement, however, became a lot easier when the Consumer Finance Protection Bureau (CFPB) issued new rules in 2014. Following the housing crisis in 2008, regulators realized that consumers were not necessarily receiving clear information about their mortgage obligation. Mortgage statements may be formatted differently, but they contain 9 important pieces of information.
- Mortgage Servicer Information: Your mortgage servicer is not necessarily the same bank you went to when you originally received your mortgage. Your mortgage servicer is the financial institution currently sending your monthly statements or coupon books. You send your payments each month to this company, and they process the payment for you. The servicer’s contact information is also included on the statement.
- Loan Number: This number identifies your mortgage, and you’ll need to have this number if you ever contact the mortgage servicer.
- Payment Breakdown and Due Date: This section tells you how much money you need to pay the servicer this month and when that payment is due. Mortgages usually have a courtesy period during which you can make the payment without facing a late fee. So, if your payment is due on the first of the month, you may have until the 15th of the month to actually get the payment to the servicer. After that time, a late fee is added on to your payment. So, you’ll see another payment amount listed that you’ll owe after the courtesy period is over. In addition, you’ll find a breakdown of your monthly payment into principal, interest, escrow, and fees. So, you know how your total payment is going to meet all of your obligations to the lender.
- Outstanding Principal: Principal is the total amount of money you still owe the lender out of the original amount that you borrowed.
- Interest Rate: Interest is basically the fee that you pay every month for allowing you to borrow money. The interest rate on the statement is the rate of interest the lender is currently charging you, and the dollar amount you pay every month in interest is based on that annual rate and your current outstanding principal balance. If you have a fixed rate mortgage, the interest rate does not change. If you have an adjustable rate mortgage (ARM), your interest rate may change every 6-12 months.
- Maturity Date: This is the date by which your mortgage balance must equal zero.
- Prepayment Penalty: A prepayment penalty is a fee that is assessed if you repay your mortgage before a specific date. Most residential mortgages do not have prepayment penalties, so you may not see this if it is not a feature of your mortgage.
- Prior Transaction Details: Your statement shows when the lender received your last payment as well as a breakdown of how that payment went to cover interest, principal, escrow, and fees. In addition, this section shows how much you have paid in total to each of these categories so far this year.
- Escrow Payment and Balance: Rather than leaving you to pay homeowner’s association fees, insurance, and property taxes yourself, the mortgage lender may do this for you to protect its financial investment. Every month the lender sets aside a portion of your payment into an escrow account, a non-interest bearing account, so that money is available to pay your homeowner’s association fees, insurance, or property taxes when they are due. Your statement not only shows how much of your current payment is going into the escrow account but also the current balance the lender has set aside for those payments.
