12 Reasons Today’s Housing Market Is Not the Great Recession All Over Again

Posted on April 27th, 2020

While it’s becoming easier to compare the housing bust that sparked the Great Recession with today’s uncertain climate, the two just aren’t the same.

You’re probably going to see lots of articles warning of the next housing crash, claiming homeowners will be unable to pay their mortgages and forced to sell due to COVID-19.

But those opinions may ignore a lot of real statistics that paint an entirely different picture.

I used actual numbers from the latest Black Knight Mortgage Monitor report for February 2020 to illustrate.

Greater Share of Homeowners with 10% or More in Equity

then vs. now

First off, today’s homeowners are flush with home equity. In 2007, 14.5% of homeowners had 10% or less in equity. Today, just 6.6% have less than 10% equity.

This is due to several years of strong appreciation coupled with deleveraging.

In other words, not tapping equity via a HELOC or a cash out refinance, while also paying down debt via regular principal and interest payments.

During the early 2000s, homeowners were serially refinancing their homes while also making interest-only payments.

This meant they were overleveraging themselves and often getting into loans they couldn’t actually afford due to lax underwriting standards.

Loan-to-Value Ratios (LTVs) Are Lower Today

To that same point, today’s loan-to-value ratios (LTVs) are a lot lower than they were a decade or so ago thanks to more prudent underwriting guidelines.

The total market combined LTV (CLTV), which includes second mortgages, was 57.4% in 2007, and just 52.3% today.

The average CLTV was 61.83% back then, and just 53.31% today. Again, this shows many homeowners have lots of equity, as opposed to a massive mortgage on an overpriced property.

Simply put, equity means options, and vice versa. Even if borrowers struggle to make mortgage payments, the equity cushion provides better exits like a normal home sale as opposed to a short sale.

It also disincentivizes things like strategic default, where homeowners voluntarily walk away from their “worthless homes.”

Average DTI Ratios Are Also Lower

In terms of borrower capacity to repay, debt-to-income ratios (DTIs) are also lower today than they were in 2007.

While the average DTI at origination was 34.5% back then, it’s currently 33.5%. You might say it’s not much different.

But consider this – how many loans were actually properly underwritten back then? How many were stated income, effectively making the DTI measure useless?

The answer is most loans relied on stated income back then, while today’s DTI ratios are driven by real tax returns, pay stubs, and so on.

Borrower Credit Scores Are Higher, Delinquency Rate Lower

Then we’ve got credit, which is also better than it was leading into the Great Recession.

In 2007, the average original credit score was 708, compared to 736 today. And the average current credit score is 713, much lower than the 747 today.

While credit score isn’t everything, combined with more homeowner equity and better quality mortgages means lower defaults.

And we’re seeing that, with the mortgage delinquency rate 4.92% in 2007 compared to 3.28% today.

Again, you can thank properly underwritten mortgages for that, and a homeowner’s desire to protect the equity they’ve accrued.

Payment-to-Income Ratios Are Much Lower

Part of it just has to do with affordability, or the payment-to-income ratio.

It’s “a measure of how well home prices are supported by current incomes and interest rates,” and is much stronger than in years past.

In 2007 it stood at 31.8%, and today just 20.9%, a testament to how affordable homes are despite prices being nominally high.

Remember, you have to factor in inflation between now and then, along with higher wages, lower mortgage rates, and so on.

While the home may cost more than it did at the subprime peak, it’s actually cheaper for the reasons mentioned.

And again, a borrower’s income is actually verified today, as opposed to them simply stating that they made X amount per month.

Much Less Subprime Lending Today

While credit profiles are mostly better today than they were, subprime lending still exists today.

In the mortgage industry, it’s defined as a sub-620 FICO score, which is all you need to get an FHA loan or a VA loan.

However, the number of active subprime loans in 2007 was a whopping 5.1 million. Today, it’s less than two million.

To make matters better, these homeowners generally have more equity and a boring old 30-year fixed as opposed to some exotic mortgage.

Fewer Adjustable-Rate Mortgages and Option ARMs

Speaking of mortgage product, the number of active adjustable-rate mortgages is nowhere close to what it was in 2007.

Entering the Great Recession, there were a staggering 12,890,000 ARMs in circulation. Today, just 3.2 million.

Additionally, 4.95 million of those 2007 ARMs were scheduled to reset (higher) within three years.

Just 320,000 of today’s ARMs are scheduled to reset in three years. These borrowers also have fantastic options to refinance to a lower or comparable fixed-rate mortgage.

Then there were the option ARMs, which numbered 2,230,000 in 2007. Those are/were truly toxic mortgages that total just 320,000 today.

So to summarize, today’s homeowners have more equity, higher FICO scores, lower DTI ratios, properly-underwritten loans, and mostly fixed-rate mortgages with interest rates at/near record lows.

Throw in the fact that housing inventory is at its lowest point in years and it’s hard to compare then to now, even with COVID-19 beginning to make us question everything.

Source: thetruthaboutmortgage.com

Payment Deferral Will Be an Option to Repay Mortgage Forbearance

Last updated on June 23rd, 2020

The Federal Housing Finance Agency (FHFA) announced today that Fannie Mae and Freddie Mac have launched a new payment deferral option in light of the unprecedented disruption caused by the coronavirus.

The new workout option, known as “COVID-19 payment deferral,” was specifically designed by Fannie Mae and Freddie Mac to help those affected by a temporary hardship related to COVID-19.

The goal is to help borrowers in a simple and straightforward manner achieve current loan status after up to 12 months of missed mortgage payments.

How COVID-19 Payment Deferral Works

  • The delinquent amount is moved into a non-interest bearing balance
  • No payments are made toward this balance and mortgage remains otherwise changed
  • It is due at maturity or earlier if mortgage is refinanced or home sold
  • No trial period is necessary and runs through automated process to expedite

The way payment deferral works is pretty simple, which is the entire point of offering it.

Say a borrower missed 12 mortgage payments that were $2,000 each. That $24,000 would be set aside in a non-interest bearing account.

It would not need to be paid down or touched at all until the homeowner either refinanced their mortgage, sold their home, or otherwise reached maturity based on the original loan term.

The borrower’s original mortgage would remain unchanged otherwise, meaning they’d resume making the $2,000 monthly payment they were accustomed to making before COVID-19 disrupted their income.

This would make getting back on track very straightforward, and hopefully doable for most homeowners, assuming they are re-employed or find new work.

Eligibility for a COVID-19 Payment Deferral

  • Borrower must be on a COVID-19 related forbearance plan and unable to reinstate loan in full
  • Borrower must have a hardship resulting from COVID-19 such as illness, unemployment, or reduced income
  • Loan servicer must determine delinquency was temporary and borrower has ability to repay mortgage
  • Must confirm borrower has resolved hardship and is committed to resolve the delinquency
  • Loan must have been current or less than 31 days delinquent as of March 1, 2020

In order to be eligible for the COVID-19 Payment Deferral option, you must be in a COVID-19 related forbearance plan and able to resume regular mortgage payments.

This includes forbearance plans such as the one offered under the CARES Act, along with proprietary plans offered by individual banks, assuming Fannie or Freddie own your mortgage.

At the same time, you must be unable to fully reinstate your mortgage at the end of the forbearance period or unable to afford a repayment plan.

Additionally, the hardship has to be a result of COVID-19, not for some unrelated reason. To that end, the mortgage should have been current or no more than 31 days late as of March 1st, 2020, before this all began.

It should also be 31 or more days (one month) delinquent but less than or equal to 360 days (12 months) delinquent as of the date of payment deferral evaluation.

The loan servicer will achieve a so-called “Quality Right Party Contact,” or QRPC, in which they determine the reason for delinquency and whether it’s temporary or permanent.

This includes determining if the borrower has the ability to repay the mortgage debt, educating the borrower on workout options, and obtaining a commitment from the borrower to resolve the delinquency.

Lastly, the servicer must confirm that the borrower has resolved the hardship, though they are not required to obtain documentation of the borrower’s hardship.

The servicer must complete the COVID-19 payment deferral in the same month in which borrower eligibility is determined, though they will be granted a processing month.

So if your mortgage is 12 months delinquent as of the date of evaluation, you must make your full monthly mortgage payment during the processing month in order to receive the payment deferral.

Note that while loan servicers may report the status of payment deferral to the credit bureaus, they cannot charge the borrower administrative fees, late fees, penalties, or similar charges.

This means it shouldn’t count against you, though I did discuss the idea of forbearance preventing you from getting another mortgage.

Those who are unable to resume mortgage payments will be evaluated for other options, such as a Flex Modification that lowers payments via interest rate and/or loan term adjustments.

Overall, this confirms what we knew was coming and is excellent news for homeowners in forbearance plans.

It means they can continue making regular mortgage payments if affordable, as opposed to being forced to pay a lump sum or go on a repayment plan.

And the missed payments won’t be due until they refinance, sell their home, or the loan term ends.

The bad news is this might cause even more homeowners to opt for mortgage forbearance.

If you have an FHA loan and requested forbearance, they have a similar offering known as a “COVID-19 Standalone Partial Claim,” which is also a no-interest, junior lien that requires no payments and isn’t due until payoff, sale of your property, or when refinancing.

Those with VA loans are allowed to defer any missed payments and pay them at the end of the loan term along with the final payment.

Additionally, the VA requires any forborne payments to be non-interest bearing, meaning you won’t be penalized for doing so.

You may also be given the option to pay toward that deferred amount over time via a repayment plan or request a loan modification if unable to resume regular payments.

Read more: There Will Be a 3-Month Waiting Period to Get a Mortgage After Forbearance

Source: thetruthaboutmortgage.com

Smart Ways to Build Equity in Your New Home

Now that you’ve invested in a home, how do you increase its value?

That’s called “building equity.” Equity is the market value of your home or property, minus your outstanding mortgage debt. So, for example, if you can sell your home for $450,000 and you still owe $100,000, you have $350,000 in equity. Building equity is one the biggest financial benefits of ownership.

If you live in a market where home values are rising, yours may float up with the rising tide and your equity will increase without doing a thing.

Or you can work on growing your home’s value by decreasing the amount you owe and/or increasing the value of your property. Here are some ways to do both.

Mortgage payments

Part of every mortgage payment goes towards paying off your loan’s principal and interest, with most of the payment going to interest in the loan’s early years. You can use Zillow’s amortization calculator to estimate how much money will be paid over the life of your loan for principal and interest. If you pay down the principal faster, your equity should increase faster. This can be done a few different ways.

Paying more: If you have a 30-year mortgage, adding more to your payment either monthly or when you have extra cash can help you gain equity. If you pay more, make sure your lender applies it to your principal. This is a great way to use your tax refund, a bonus from work or an inheritance.

Paying faster: You could divide your monthly mortgage payment into two bi-weekly payments, for a total of 26. So instead of 12 payments a year, you make the equivalent of 13, paying down your mortgage faster and gaining more equity. But make sure to check with your lender first to make sure they accept bi-weekly payments. And make sure all the extra money goes immediately to the principal instead of waiting for the second half-payment. Reputable lenders will not charge a fee for bi-weekly payments.

Refinancing: If you have a 30-year mortgage, you might want to consider refinancing to a 15-year loan, which has a lower rate. Most consider this worthwhile only if you can drop your interest rate by at least 1.5%. Factor in any closing costs before making this move. Also make sure your mortgage doesn’t have a penalty for pre-payment. It’s not common, but it’s better to check.

Before you decide on any of these options, consider if it’s really the best use of your money. If you’re not maxed out on employer-matched saving accounts, perhaps you should be putting extra money into your 401(k) rather than paying off a low-interest mortgage. It’s smart to talk with a financial advisor to determine the best investment strategy for you.

Also make sure you have an emergency fund, typically 6 months of savings in case you fall ill or lose a job.

Renovate wisely

Making smart improvements and adding the right amenities to your home can also increase its market value, which means more equity for you.

How do you know which projects will bring the best return on your investment? Even though you’ve just moved into your new place, there are home improvements buyers typically love: bathrooms, attics, entrances, kitchen updates, garage doors and siding. Popular features can vary by area and home type, so consider what’s in demand in your market.

Also, be mindful of your market as you’re thinking about how much to invest in improving your home. The realities of a buyers or sellers market will have an impact on how much return you’ll get when you sell.

You can find more inspiration, ideas and guidance in Zillow Porchlight home improvement articles.

For new homeowners, Zillow’s design and home improvement videos show you how to tackle your first project.

Source: zillow.com

What Happens When a One-of-a-Kind Home Needs a New Owner?

It’s essential to have the right marketing plan, pricing strategy and real estate agent.

When shopping for a home, it’s not uncommon to come across one that truly stands out. It’s not because the home is an old fixer-upper or that it’s a newly renovated home with a designer kitchen. It’s a home that’s architecturally significant or in some way conveys a “different” attribute. For instance, it might be a castle, a church or even a fire station that has been converted into one or more living spaces.

With an unusual home, pricing and marketing can be a challenge. Here are three things to keep in mind when either buying or selling a truly unique property.

1. Buyers should be cautious

As crazy as it sounds, a would-be buyer may want to reconsider purchasing an offbeat home. While it may be a home you love, it is also an investment. A home with a unique, unchangeable structural feature will likely alienate a large portion of the market.

If you’re faced with the opportunity to purchase a unique home, don’t get caught up in the excitement of it all. Think long term. Understand that when it comes time to sell, it may be a burden, particularly if you try to sell in a slow market.

2. When selling, don’t assume buyers will love what you love

As the owner of an interesting or different home who is considering a sale, be aware that not everyone will have the same feeling about the home as you did when you bought the place. While you’re likely to get lots of activity, showings and excitement over your property, a lot of that may simply be curious buyers, nosy neighbors or tire kickers.

Time after time, sellers with unique homes believe that since they fell head over heels, another buyer who might feel the same. But that person could be hard to find.

3. Hire the right agent and have a serious marketing/pricing discussion

A unique home requires a unique marketing plan and pricing strategy as well as a good agent. The buyer may not even live in your local market, and instead might be an opportunist buyer open to a unique property. So you should consider advertising outside the mainstream circles. Media and press can help get the special home the attention it may need.

The buyer may not want to live in your town but is fascinated by an old church or castle. The more you get this out there, the better your options for finding the specific buyer.

If you get lots of action but few offers, you may need to drop the price below the comparable sales to generate interest, particularly if you really need to sell. Just like a home with a funky floor plan, on a busy intersection or with a tiny backyard, the market for your unique home is simply smaller.

With online home listings, blogging and real estate television shows, unique homes stand out and get more exposure than ever. But selling a distinctive or offbeat property requires out-of-the-box thinking early on, and with a top agent. You only have one chance to make a first impression. Be certain to price the home right, expose it to the masses and have a strategic plan in right from the start.

Top image from Zillow listing.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published October 10, 2014.

Source: zillow.com

RMS Settles with NY Regulator for $1.5M Over Data Breach

Residential Mortgage Services will pay $1.5 million in a cybersecurity settlement with New York’s Department of Financial Services, the agency has announced.

According to a consent order, RMS suffered a data breach but failed to disclose it to the regulator as required under state cyber rules.

RMS generated a record mortgage origination volume of $8.5 billion last year, according to a press release from the company.

Read the full announcement from New York’s Department of Financial Services.

Source: themortgageleader.com

5 Weird Reality Checks You’ll Get If You Buy a Country Home

City living may have its perks, but combine the congestion and crowds with the threat of the novel coronavirus, and it’s no wonder that many city dwellers these days are fleeing to greener pastures (or thinking about it).

But what is it really like to transition from the hustle and bustle of a city to the more relaxed pace of rural life? As a New Yorker who bought a summer cottage with my husband in upstate New York six years ago, I’ve come to realize that country life isn’t always so serene. In fact, certain things have happened out yonder that make me very glad that we’ve kept New York City as our main residence.

Curious about what curveballs might await if you buy a country home? Here are a few of my more surprising discoveries.

Country life: Is it right for you?
Country life: Is it right for you?

William Geddes

1. The country’s serene silence is often punctuated by gunfire

People in the country love their guns. I’m fully behind the Second Amendment, but we didn’t realize how much shooting takes place in small towns, especially at local gun and hunt clubs, of which there are many in our upstate county.

In fact, there’s one right across the road from our house, and the members shoot skeet early every Sunday morning—without fail. It’s loud and probably should’ve been a deal breaker for us when we considered the house, but we bought it anyway.  Now we take a long walk with the dog when the popping begins.

2. Cute woodland critters will eat everything you plant

I listened to the nursery specialists and planted the flowers that deer weren’t supposed to eat, but they still come by regularly to nibble. Apparently, in a bad winter, if these animals are hungry enough they’ll forgo their usual diet and consume just about anything.

So I nixed the flowers and went with wild grasses and herbs—and the bunnies thanked me by enjoying a nice salad every chance they could. As a last resort, I’m now letting the garden slowly grow over to grass and adding mulch to tamp down any errant weeds. My dream of colorful flower beds has turned into a patchy lawn with brown bits for accent.

Dozens of flats later,and still the garden is spotty
Dozens of flats later,and still the garden is spotty

William Geddes

3. Cute woodland critters probably live inside your house

Rodents are expected in a 200-plus-year-old house, so we set traps every weekend during the colder months. (My husband is charged with mouse eradication.) But I never expected the mice would nest—and birth babies—between our bed sheets. After finding a furry family tucked inside my comfy queen bed, going to sleep has become a bit of a nail-biter, since I’m always wondering what I might find there next.

4. Dogs can’t run free

Our rescue pup pretends to guard the front lawn.
Our rescue pup pretends to guard the front lawn.

William Geddes

One great joy in owning a country house (we thought) would be the ability to open the door and let Django, our sweet dog, race around. But when she did venture forth, everything went south.

While chasing a possum, Django apparently charged (and frightened) the neighbor across the way and her two lap dogs. Said neighbor let me know that this was not OK on her property. Clearly getting to know our neighbors was getting off to a great start!

Next, Django proceeded to chase a mouse into the downspout of another neighbor’s house and then punctured the metal with her jaws to get the creature out. Needless to say, I was on the hook for a new downspout that had to be custom-fit and painted to match my (now irate) neighbor’s house.

5. Country dogs are huge and scary

Meanwhile, my neighbor on the other side of me has an enormous black shepherd that, I kid you not, looks a whole lot like a black bear. Even worse, this dog doesn’t have tags that jingle when it approaches, so every time it appears on our lawn, I’m convinced it’s a bear and start to panic.

Every. Time.

I’m thinking of giving this neighbor a set of cute tags for the dog’s collar with the hope that it’ll be worn and my blood pressure will finally recover. Until then, I keep practicing deep breaths as I sink back into the deck chair on the porch of my country house and try—and fail—to relax.

All I’m saying is if you think owning a country house ushers you into a life of peace and quiet, don’t be so sure.

It wasn't me—I didn't do it!
It wasn’t me—I didn’t do it!

William Geddes

Source: realtor.com

Senate Passes $3,000 Child Tax Credit for 2021

An expanded child tax credit for 2021 is about to become law. After some procedural wrangling, the Senate narrowly approved President Biden’s stimulus package to help tackle the coronavirus pandemic and stimulate the economy. Because the Senate made some changes to the House-crafted bill, titled the American Rescue Plan Act of 2021 (“American Rescue Plan”), the House will have to revote on the revised bill before sending it to Biden’s desk for his signature. We expect that will happen next week. One provision in the American Rescue Plan would, for one year, expand the child tax credit and make it fully refundable.

Presently, the child tax credit is worth $2,000 per kid under the age of 17 whom you claim as a dependent and who has a Social Security number. To qualify, the child must be related to you and generally live with you for at least six months during the year. The credit begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return, or over $200,000 on a single or head-of-household return. Up to $1,400 of the child credit is refundable for some lower-income individuals with children, but these people must also have earned income of at least $2,500 to get a refund.

The American Rescue Plan would temporarily expand the child tax credit for 2021. First, the plan would allow 17-year-old children to qualify. Second, it would increase the credit to $3,000 per child ($3,600 per child under age 6) for many families. Third, it would remove the $2,500 earnings floor. Fourth, it would make the credit fully refundable. And fifth, it would allow half of the credit to be paid in advance by having the IRS send periodic payments to families from July 2021 to December 2021.

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It’s FREE!]

Phase-Out for Wealthier Parents

Not all families with children would get the higher child credit. The enhanced tax break would begin to phase out at AGIs of $75,000 on single returns, $112,500 on head-of-household returns and $150,000 on joint returns. Under the proposal, the IRS would look to the 2020 return to determine eligibility for the credit. If a 2020 return has not yet been filed, the IRS would look to 2019 returns. Families who aren’t eligible for the higher child credit would claim the regular credit of $2,000 per child, less the amount of any monthly payments they got, provided their AGI is below the current thresholds of $400,000 on joint returns and $200,000 on other returns.

Periodic Payments in 2021

Regarding the advance payments, the plan calls for the IRS to send out a check (mainly in the form of direct deposits) periodically from July through December to families. These periodic payments would account for half of the family’s 2021 child tax credit. For example, if monthly payments were made, this would result in payments of up to $250 per child ($300 per child under age 6) for six months and would be a nice windfall for many families. Take a family of five with three children ages 12, 7 and 5. Assuming the family qualifies for the higher child credit and doesn’t opt out of the advance payments, they could get $800 per month from the IRS from July through December, for a total of $4,800. They would then claim the additional $4,800 in child tax credits when they file their 2021 return next year. (Use our 2021 Child Tax Credit Calculator to see how much you would get per month under the current plan.)

Democratic lawmakers want the IRS to start making the payments to eligible Americans in July, giving the agency just a few months’ lead time to set up its computer systems to handle such a massive, but temporary, new payment program. The American Rescue Plan also calls for the IRS to develop an online portal so that individuals could update their income, marital status and the number of qualifying children. People who want to opt out of the advance payments and instead take the full child credit on their 2021 return could do so through the portal.

Some Overpayments Would Not Have to Be Paid Back

With advanced payments of the child tax credit, there will sure to be instances in which families receive more in advanced child tax credit payments from the IRS than they are otherwise entitled to. And the American Rescue Plan contemplates this by providing a safe harbor for lower- and moderate-income taxpayers.

Families with 2021 adjusted gross income below $40,000 on a single return, $50,000 on a head-of-household return and $60,000 on a joint return would not have to repay any credit overpayments that they get. On the other hand, families with 2021 adjusted gross incomes of at least $80,000 on a single return, $100,000 on a head-of-household return and $120,000 on a joint return would need to repay the entire amount of any overpayment when they file their 2021 tax return next year. And families with 2021 adjusted gross incomes between these thresholds would need to repay a portion of the overpayment.

Is the IRS Up for the Challenge?

Many tax experts and some lawmakers question whether the IRS, with its out-of-date computer systems, shrunken work force and its myriad of other duties, would be fully able to deliver periodic child credit payments, especially if the expanded child tax credit and advance payments are eventually made permanent, which could very well happen. Some Senate and House Democrats are already talking about making this permanent, touting the potential impact that a fully refundable, expanded child tax credit would have on reducing child poverty.

Setting up a new program to deliver regular payments to taxpayers who must meet complex eligibility requirements to qualify for the child credit will be a challenge for an agency that is not used to sending out periodic payments. The IRS would need more funding for such a big undertaking. The House bill authorizes an additional $400 million for the IRS to take on the additional work, but some experts question whether this is enough. The IRS says that to facilitate advanced payments of the credit, it would have to build a system to compute and recompute payments as taxpayers provide new information. Such a system must also be able to issue and track payments, as well as to reconcile all payments sent out to each taxpayer during the year with the taxpayer’s credit taken on the tax return. The agency would also need to develop a program that would flag returns that don’t accurately include all advance payments received during the year.

Another issue that the IRS will have to deal with is how to minimize the potential for fraud when it comes to refundable child tax credits. For example, the IRS estimates that in 2019 it improperly paid $7.2 billion in such refundable credits.

Source: kiplinger.com

Change Your Payment Due Dates

If you ever look at your budget, you might notice that one payment period is a bit more “bill heavy” than another.  Wouldn’t it be nice if the due date on your bills was different?  Believe it or not, you can change the due dates on some* of your monthly bills!

 how to change the dates your bills are due

What most people do not realize is that creditors and even utility companies can change your payment due date.  Not every single customer’s bill is due on the same date every month.  Most of them have at least 2, if not 3, billing cycles they run each and every month.

If you think about it, that makes sense.  There is just no way any billing department could cover all of those payments coming in just one time every month.

This can play to your advantage. These companies will allow you to change when your bill is due by moving you into another billing cycle period.

HOW TO CHANGE YOUR PAYMENT DATE

There are some steps you need to follow to help you actually change your payment due date.  Make sure you follow them in order, to ensure that you change them properly the first time.

STEP 1:  List all payments by due date and by type

This is where your budget will help.  Take all of your monthly payments and list them out by the date they are due, the payee and the type of payment be it a fixed or changing amount.

This is important so that you can see when the bills are due and also which bills would work better into your budget if they were paid at a different time during the month.

For example, yours might look a little like this:

1st – Bank of America (fixed)
5th – AT&T Wireless (fixed)
5th – AT&T Uverse (fixed)
8th – Auto Loan #1
9th – City Water (variable)
12th – Electric company (variable — might try to level pay to make it fixed)
20th – Gas company(variable — might try to level pay to make it fixed)
21st – Auto Loan #2 (fixed)
25th – Insurance company (fixed)

…..just to list a few of your bills you might have.

STEP 2: Check the due dates

Now, look at the amounts you have to pay for each of those bills and when they are due.  In addition, look at what your pay period is.

For example, if you are paid on the 15th of every month, it might help if you could move your water and even cable bill to a bit later in the month (when you don’t have a large mortgage payment coming out of your income). That might be easier on your budget.  Here is how it might look if you moved payments around:

1st – Bank of America (fixed)
5th – AT&T Wireless (fixed)
5th – AT&T Uverse (fixed)  MOVE TO AFTER 15th
8th – Auto Loan #1
9th – City Water (variable)  MOVE TO AFTER 15th
12th – Electric company (variable — might try to level pay to make it fixed)
20th – Gas company(variable — might try to level pay to make it fixed)
21st – Auto Loan #2 (fixed)
25th – Insurance company (fixed)

STEP 3:  Call the companies

Of course, moving your due date works better based on what your budget dictates, but you need to make sure that you can actually do that.

Make a call to your company and ask them if there is any way to move your payment to a date after the 15th of each month.  If you find that they can not, then you might need to take a look and see if you can’t move the electric bill instead.

While it is ideal for you, keep in mind that you will still have to make your payment on the billing cycle date that they offer.  Most will not allow you to just select any day of the month, but will instead, offer you an alternative date instead.

One other thing to keep in mind is that if you make a change to your payment due date, it may require a higher payment the first billing cycle.  That will allow them to cover the additional period that you did not yet pay for (so if normally pay on the 12th and payment moves to the 25th,  you will have to cover any usage that might have taken place during those 13 days between the original payment and new payment due date).

Now, finalized your budget so you make your payments on a schedule which works best for YOU.

can I change when my bills are due

can I change when my bills are due

If you look at your budget and notice that all of your bills are due around the same time each month, you might be wishing you could change those dates. Well - you can! It is possible (and easy to) change the due date for your bills. It can really help you budget and plan much better when your bills align with your pay cycle.

Source: pennypinchinmom.com