For most individuals, signing a mortgage agreement is the only way to obtain their greatest investment: their homes. But finalizing this paperwork means new homeowners must repay the borrowed money in small increments over time with interest. Failing to do so results in the lender taking the property, so understanding mortgage maturity dates and how they affect your loan and house ownership is crucial.
Whether you’re purchasing your home or undergoing a cashout refinance in Texas, Champions Mortgage’s team believes you should be aware of how all parts of your mortgage agreement work. Below, we’ll explain maturity dates and why they matter.
What Is the Maturity Date on Your Mortgage?
Upon signing your mortgage agreement, you’ll notice a future date on the paperwork that marks the end of your loan term. This date varies depending on how long your mortgage timespan is. For instance, if you took out a conventional mortgage, it’ll be 30 years from the exact date you signed the loan.
This date also serves as your maturity date, meaning that day is the last day to make any final payments so that your loan is paid in full. Afterward, you (the borrower) no longer have any obligations to the bank or other financial establishment that loaned the money. You also won’t have to set extra money aside monthly to pay this bill anymore, but maturity dates slightly differ between mortgage types.
Balloon vs. Conventional Loan Maturity Dates
Conventional mortgages include paying monthly installments that cover a percentage of the principal amount and agreed-upon interest rates. During the first few payment installations, most of each payment goes toward lowering your interest rate amount due to a process known as amortization. After a few years, the monthly payments start chipping away bigger portions of your original loan amount.
With regular, on-time payments and amortization, your remaining amount due should be near zero as you get closer to your mortgage maturity date. During your last payment, you pay your balance in full, gaining complete ownership of your property.
Balloon loan maturity dates work slightly differently. While you still pay monthly installments, they’re smaller since they don’t include amortization, meaning you pay less of your principal. Instead, you pay a large lump sum that covers the remainder of your balance after the loan term ends since the maturity date doesn’t align with the term end and can take place afterward.
What Should You Expect If You Miss One or More Payments?
Sometimes, certain bills fall through the cracks when you’re sifting through all your monthly bills, causing you to miss a mortgage payment. Other times, a late paycheck or unexpected costs leave you without enough funds to cover the installment loan over one or more months. Whatever the cause, whether it’s your fault or not, there are consequences to missing payments.
If you missed one or two payments, your lender sends a letter explaining the delinquency act on your part. They’ll likely give you 30 days to make up this fee with its interest rate and late charge alongside that month’s original installment amount. If you can’t pay this amount or missed fees are a recurring factor in your loan period, any of the following can occur:
- A lowered credit score that affects future loans and credit card applications
- Foreclosure if you miss multiple payments or take months paying back the month you missed
- Financial loss
- Bankruptcy
Can You Shift Your Maturity Date?
If you’re struggling to meet your monthly payments, you may be interested in extending your mortgage maturity date. Not only will this help give you more time to pay your overall principal and interest rates, but it also lowers how much of this sum you’ll have to pay each month. The three best ways to do so include loan modification, refinancing, and forbearance.
Loan Modifications for Your Home
During loan modification, you and your lender revisit the terms of your current agreement to change factors like the payment schedule, interest rate, and maturity date. If, after a re-evaluation, the lender approves a loan modification, you can shorten your loan term for lower interest rates but higher monthly costs or lengthen it for smaller monthly payments but more interest overall.
You can also ask about changing your loan type to one more convenient for your situation.
Refinancing Your Home
Unlike modifications that alter your current mortgage, refinances include tossing out the original loan and replacing it with a new one. The proceeds from new payments help pay off the original loan. This option also differs from the one above since you don’t have to prove foreclosure notices or other hardships are forcing you to extend your loan period.
Moreover, you can shop around for other lenders since you don’t need to refinance with the same one.
Forbearance
If you choose forbearance, your lender may temporarily lower the amount you owe monthly or give you a pass for a few months so you don’t have to pay during that period. Taking this action keeps you from defaulting on your loan, which could eventually lead to foreclosure or you filing for bankruptcy.
However, the lender decides the length of the forbearance period and how much you pay back monthly afterward to catch up. If you feel forbearance is only a temporary solution to your financial struggles, consider loan modification to readjust your loan to your budget and lifestyle.
The Champions of Finding Each Client the Ideal Loan Program!
From fixed-rate mortgages to fixed-income security, every client has different needs that suit their unique lifestyles. So, if you’re ready to close with confidence, whether you’re saving to buy a house as a student or are refinancing to save your long-time home, we’ll explain the types of mortgage loans and our easy four-step process.
Our family-friendly team at Champions Mortgage Team offers 100% customer satisfaction, approving most loans in 15 days, which leads 96% of all applicants to close with us. To become one of them and learn more about mortgage maturity dates, call (281) 727-2500 in Sugar Land, TX, today!
