Getting a Mortgage – Don’t Stop Paying Your Bills

A Seller living on the mainland decided to sell his investment condo on Kauai. He accepted an offer and escrow was opened. The Seller thought that since the loan was going to be paid off, he no longer needed to continue to make payments on his mortgage.

When the Seller failed to make his mortgage payment, he got a courtesy call from his loan servicer informing him that they had not yet received his payment for the month. The Seller told the agent “the condo just went into escrow!” The agent’s response was that she would place a note in his file notating the sale. Seller never had another thought about it. Approximately 35 days later, the condo transaction closed, and the mortgage was paid off.

The Seller want to do a 1031 Exchange which meant he was going take the proceeds from the sale and buy another investment property to avoid paying taxes on his capital gains. The Seller found a property to purchase and needing additional funds contacted his lender to obtain a new mortgage.

He was shocked when he got the call from the bank’s representative and was told his credit score was not good enough. The fresh reported incident of a mortgage late payment not only lowered his credit report but prevented the bank in providing a loan because of the late mortgage payment.

The Seller did not understand his obligation to continue making the required payments on time and until the loan was paid off. He incorrectly and innocently thought the proceeds from the sale would pay it off, never thinking about the payoff happening after his current payment was due. The same idea is true for those refinancing a loan. Many people believe that once they apply for a mortgage refinance, they can stop paying their existing mortgage.

YOU are responsible for YOUR obligations. It is YOUR responsibility to make sure your bills are paid – and paid on time. This is especially true if you are applying for a debt consolidation refinance. If you have any question as to if you should make your next payment on your mortgage or other bills, ask your Loan Origination when your expected “disbursement date” is, and when your creditors will receive those funds. If the receipt date of funds by your creditors is close to, on, or after the current due date, you need to have a detailed conversation with Originator if you are to make any additional payments.

The bottom line is this: Until it is paid off, you are still required to make all your payments.

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