Managing Your Monthly Payments

Managing Your Monthly Payments

Now that you’ve completed all the paperwork and closed, you can start enjoying the benefits of your refinanced mortgage. Whether you now have lower payments, a shorted term, or cash to spend on other expenses, this is what to expect after closing.

What Happens to Your Old Escrow Account

If you had an escrow account for your old mortgage, there are a couple of ways that money will be returned to you.

• You may be sent a check for the funds in your old escrow account from the lender on your previous loan. In this case you should expect to receive them within thirty days.
• The funds from your old escrow account may be used as part of the payoff of your previous mortgage. This can mean a couple of things. First, the total amount of the old loan that needs to be paid off will be reduced. Second, if your new loan requires an escrow account, the funds from your old escrow account will be transferred to the new one.

Typically your lender will give you the option to choose either of these. We recommend allowing your escrow funds to be put towards the payoff of your old loan. This can help speed up the processing of your refinance, and reduce the total amount of money that you’ll need to pay at closing.

Making Additional Payments

If your budget allows for it, making additional payments or paying extra on your monthly payments is a great idea. It will mean you pay your mortgage off faster and pay less total interest. Just one extra payment per year will save you a substantial amount in interest over the life of your mortgage.

How much can one extra payment really save you? Exactly how much you’ll save by making an extra payment every year depends on the specifics of you loan. Your interest rate, the remaining balance on the loan, and how many years are left on the mortgage will all influence it. A tool called an amortization calculator will help you determine exactly how much extra payments can save.