Why have your mortgage payments automatically withdrawn from your bank account every month? Aside from the convenience of not having to think about doing it yourself, enabling autodraft also means you can avoid paying late fees.
Many people who pay their mortgage manually, either online, by mail, or on the phone, accidentally pay late from time to time. Late fees aren’t just annoying—they can be bad for your credit score. A lower credit score may result in having to pay higher interest rates on loans, not to mention higher insurance premiums and other fees. One of the simplest ways to avoid late fees and their painful consequences is to set up autodraft payments for your mortgage.
What is autodraft?
Autodraft occurs when you set up a regularly scheduled payment that is automatically withdrawn (“drafted”) from your bank account. You get to choose the day the withdrawal occurs each month. Once you’ve set up autodraft (or “autopay”), the withdrawal occurs each month on the day you’ve selected, and you don’t have to do anything else.
Autodraft offers excellent advantages, but it can seem scary to pay bills automatically without thinking about it. What if you don’t have enough money in your account when a withdrawal happens? This article is designed to answer some of your most common questions.
Why should I enroll in autodraft?
1. Convenience. Because the payment occurs automatically each month, you’ve already crossed one chore off your to-do list without having to lift a finger. No putting checks in the mail, no calling our autopay line and no logging in to pay online.
2. No late or missed payments. Here’s a tip: It’s a good idea to schedule your autodraft payments for a day or two after your paycheck or government checks typically hit your bank account. That way, you don’t have to worry about having enough funds in your account.
3. No late fees. If we don’t receive your payment on time, we’ll have to charge you a late fee. Be aware that mortgage late fees can cost up to 5% of your past-due balance. For example, if your past-due mortgage payment is $1,800, then your late fee could be as high as $90. Avoid those steep fees by setting up autodraft.
4. Secure payments. Autodraft payments are highly encrypted, with no physical paper trail that criminals could steal (unlike a check in your mailbox). Autodraft payments are done by the Automated Clearing House (ACH), a federally regulated electronic data network that U.S. financial institutions use to transfer trillions of dollars each year.
If you have an issue with your autodraft payment, the payment is fully protected under federal law. Notify your bank about problems within 60 days.
5. Protects your credit score. Did you know that consistent on-time payments are the main factor credit bureaus use to calculate your credit score? Late payments negatively impact your score, but on-time payments made via autodraft can improve your score because your payments will be timely and consistent—with no effort from you.
6. Easy set-up. Setting up autodraft payments only requires you to fill out a simple form one time. Download our Automatic Payment Enrollment Form. You can even choose to pay biweekly.
What should you watch out for when using autodraft?
1. Have enough money in your bank account. This tip is major: Monitor your bank account to ensure you’ve got enough money to cover your mortgage payment by the time your withdrawal date comes around. Otherwise, you could be hit with overdraft fees from your bank, as well as non-sufficient funds fees and late fees from us.
Here’s another helpful tip: Keep a certain amount of financial “cushion” in your bank account, just in case of emergencies (like your paycheck not coming when it normally does).
If you live paycheck-to-paycheck and often don’t have enough money in your account to pay your bills, you might want to wait to set up autodraft until you’re in a better financial position.
2. Set it up correctly. Make sure when you enable autodraft that you have entered your bank account number and routing number accurately. One of the big reasons customers get hit with late payments is that they accidentally entered the wrong account information. Always double check that the numbers are right!
3. Open your mail from Newrez. Always check each statement we mail you to make sure autodraft payments are going through correctly.
Autodraft is the best way for you to avoid late payments and fees. As long as you make sure your bank account balance can cover the draft, it will serve as a big step toward safeguarding your credit score—and your hard-earned cash.