12-14-18: Should we use auto-pay for our mortgage payment?
Question of the week: Should we use auto-pay for our mortgage payment?
Answer: Yes, but…
One of the biggest benefits I derived from the advent of everyday web availability for the common citizen was on-line banking. My desire to not have to write a bunch of checks every month and put in the mail was so strong that I left the bank I had been with for almost twenty years, and my first job out of college, that I closed my account and went to a big bank just because I could pay bills on-line. Subsequently, my preferred local bank that is strong, friendly and conservative (and Long Beach’s oldest family owned bank) established on-line banking and I immediately switched back.
Very few people write and mail checks for their monthly bills anymore. Most people pay their bills using their banks’ on-line service. That said, many people still log on one, two, three times a month and fill out their payments and then hit send. This is understandable as credit card balances and utility payments change every month. However, many still log on every month to fill out payments for accounts that have the same payment every month for house payment, mortgage or rent, auto loans, student loans, etc.
I strongly advise that if you have a payment that is the same amount every month that you establish an automatic payment every month. There are a few reasons for this. First, you do not need to remember while you are on vacation in Yellowstone, “oh shoot it’s the 14th and I need to log-on and pay the mortgage.” Second, well, there is no second. The reason to do this is to ensure your biggest payments—house, auto, other loans—are made on time all the time.
The next question I get from a lot of clients, or if they do not bring it up I try to when we close their loan, is “should I set up auto-pay with our new mortgage lender?”
My response is always, “No.”
Almost every creditor has the option to set up on their site for making payments. You input your banking information and then can set up for them to automatically pull the payment from your bank account, or you can log in and tell them how much money you want to transfer from your bank to your credit account.
I am not a big fan of having your creditors pull funds from your bank account and strongly recommend you push your payments from your bank account to your creditors.
There are several reasons I prefer the “push” over the “pull.” First, you are in total control. Once you set up the automatic payment from your bank every month you can quickly and easily make changes if necessary. If your bank account is compromised most banks will quickly assist you in setting up a new account and many will also enable the transfer of your existing autopayments to your new account. You immediately know if your payment has been made and applied to your account.
Recently one of our clients was setting up his first payment, and subsequent auto-pays, after we funded his mortgage. He input his banking information, input the payment amount and clicked, “confirm” on making the payment and having subsequent payments pulled on the same day every month in the future. After a few days he noticed his payment was showing “paid” on the lender website, but the funds had not left his bank. After several days, we conferenced called the lender and discovered he had entered his account number incorrectly. Because the lender’s computer software did not know the account number was incorrect it assumed the payment had been made. It took about ten days before the software discovered no payment was coming and marked the account as still due. Simple mistake, but had he not checked his bank account to see if the payment had been taken out by the lender he would not know for quite some time—long enough that he may have been subject to a late penalty.
Had he set up for the payment to be sent from his bank every month he would have been notified immediately by his bank had he incorrectly input his mortgage account number and been able to make the correction. He has cancelled his auto-pay with the mortgage company and set up auto-pay from his bank.
It is not uncommon for us to receive notifications that our personal data may have been compromised, hotel chains, retailers, even the IRS have been hacked and data taken on account holders. Should this happen to your mortgage company they will obtain some very critical information, name, address, social security number, date of birth. However, if you do not have your auto-pay set up for the lender to pull your payment every month the hackers will not have your bank accounts routing and account numbers.
Yes, your account information can be compromised from your bank. However, if this happens and your accounts are accessed and funds transferred your bank will very, very likely reimburse the funds taken and set up a new account. Will this be the case if someone obtains your account information from a mortgage, credit card or student loan lender? Perhaps, perhaps not.
I strongly encourage you use auto-pay, and strongly recommend as well that you set up the auto-payments to initiate from your bank and not from your creditors.
Have a question? Ask me!
Tame. That is the one word to describe prices for wholesalers and consumers in November. The Producer Price Index rose only 0.1% in November, after climbing 0.6% in October, and increased 2.5% from last November after year-over-year increase of 2.9% in October. Consumer prices rose at the same pace in November as October, up 0.2% and the annual increase from last year is up 2.2%. Both the PPI and CPI were strongly influenced by gas prices dropping 4.2% for the month, however stripping out food and energy the “core” CPI increase was still only 0.2% from the prior month. Overall the news is interest rate friendly as the price increases are close to the Fed’s target and provide some foundation to speculation the Fed may not go through with three rate increases in 2019.
Not as tame. Retail sales as a whole increased 0.2% from October, however taking out spending on gasoline and sales were up 0.5% for the month a strong increase, evidently consumers took their savings at the pump and logged on to buy stuff. On-line sales in November were up 2.3%, department sales increases at a much smaller rate but were still up 0.4% from the prior month. Further showing the strength of the retailers was the revision to a 1.1% increase in October sales from the prior release stating sales increased 0.8%. The strong November sales and very strong October sales indicates the Gross Domestic Product for the 4th quarter of 2018 should come in at a pretty high number. The retail sales data is not real friendly to lower rates. Since consumer spending is 65-70% of our economy strong sales puts upward pressure on prices as well as on the labor pool
Where are we going? That is the question investors are asking and there is no consensus—which typically indicates an economy in transition. On the one hand, some are predicting inflation will rise through 2019 due to higher prices for wholesalers and consumers due to higher tariffs as well as higher costs for wages and salaries due to tight labor markets. If this is the case rates will continue to increase in 2019. On the other hand, some are predicting that inflation will remain flat near current levels or decline due to the economy slowing due to rising rates.
Rates for Friday December 14, 2018: Rates are retaining their levels after the recent dip, mainly due to investors pulling money out of stocks and putting into long-term fixed rate investments, such as bonds and mortgages. It appears that with inflation somewhat benign that the mortgage rates in the near future will be strongly influenced by the U.S. government. How? Because the Treasury has announced its borrowing needs and they are significantly higher than last year. Because the government can print money to pay its bills it is not very rate conscious, therefore if it needs to pay higher rates to borrow in order to finance operations it will borrow at higher rates. Between the government coming to market to borrow and the Federal Reserve putting its assets on the market to unwind its balance sheet from it Quantitative Easing programs starting in 2008, there is a lot of supply in the fixed rate markets. Over supply leads to higher interest rates. The economic data indicates somewhat stable rates, the financial markets indicate upward pressure. In the meantime rates have dropped in recent weeks—time to take advantage.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:
30 year conforming 4.50% Flat
30 year high-balance conforming 4.625% Down 0.125%
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.
On my Facebook page I have been running a “Best Christmas Movie” poll for several weeks. I started by asking people to nominate their favorite films. The following week I posted the top sixteen nominees and every week since people have voted for their favorites to whittle the contestants down to the final two, posted today. It has been interesting as throughout there has been a balance between “old” (made prior to 1960’s) to “new” (made 1980’s or later). Our final two mirror the balance with “It’s a Wonderful Life” (1946) in a run-off against “A Christmas Story” (1983). Interesting, though both are widely considered two of the best Christmas movies of all time, neither did well at the box office and gained their popularity several years after their releases.
Like types of cookies, pie, whiskeys or kids, it is very hard to pick a favorite Christmas movie; but it is always fun to experience them all while trying to decide!
Have a great week,
Dennis
Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog
