What Happens After Mortgage Reinstatement?
Discover the crucial steps and implications after successfully reinstating your mortgage. Understand your renewed loan and financial standing.
Mortgage reinstatement allows a homeowner to bring a delinquent mortgage loan current. It involves paying the total amount past due, including all missed payments, late fees, and other charges. This action effectively “resets” the loan, enabling the borrower to avoid foreclosure and resume their regular monthly mortgage payments. Reinstatement addresses temporary financial setbacks that led to missed payments, offering a path to regain control of the home loan.
Confirmation of Reinstatement and Account Status
Following a successful mortgage reinstatement, borrowers should anticipate receiving official communications from their lender or mortgage servicer confirming the change. A formal reinstatement letter is issued, serving as evidence that the loan is no longer in default. This document should clearly state the effective date of the reinstatement, confirming the loan has been brought current. It also provides an updated account summary, detailing how the payment was applied and reflecting adjustments to the loan’s principal balance.
The reinstatement letter should itemize all amounts paid, including past-due principal and interest, late fees, property inspection costs, attorney fees, and any other expenses incurred during the delinquency period. Some of these fees might be capitalized, meaning they are added to the outstanding principal balance of the loan, which can slightly increase the total amount owed. Borrowers should review this letter to ensure figures are accurate and no erroneous charges have been applied.
Beyond the formal letter, the borrower’s online mortgage account or subsequent monthly statements should reflect the updated current status of the loan. The loan’s status shifts from delinquent to current. If discrepancies are noted, such as the loan still appearing as past due or incorrect amounts, contact the servicer promptly, ideally in writing, to dispute the information and request correction.
Resuming Regular Mortgage Payments
After a mortgage reinstatement, the next step is to resume regular monthly mortgage payments. The reinstatement letter or subsequent mortgage statement will indicate the exact due date for the next payment, which is the first regular payment due after the date of reinstatement. Adhere to this schedule to prevent falling back into delinquency.
The correct payment amount for future installments can be found on the new mortgage statement provided by the servicer. While the reinstatement covers past arrears, the monthly payment amount may have slightly adjusted if certain fees, such as property taxes or insurance premiums, were incorporated into the new principal balance or if the escrow account was re-analyzed. Borrowers should verify this amount against their previous regular payment to understand minor changes.
Mortgage payments can be made through various channels, including the servicer’s online payment portal, automated phone systems, mail via check or money order, or by setting up auto-pay directly from a bank account. Utilizing electronic payment methods often provides immediate confirmation and reduces the risk of postal delays. Set up payment reminders or automatic deductions to ensure timely payments are consistently made.
Upon making the first few payments after reinstatement, regularly check the mortgage account online or review subsequent statements to confirm that payments are correctly applied to the principal, interest, and escrow. This vigilance helps ensure the loan remains in good standing and no further issues arise. Maintaining a consistent payment history helps rebuild financial stability.
Impact on Your Loan and Credit Profile
A mortgage reinstatement impacts a borrower’s loan and credit profile. By bringing the loan current, the threat of foreclosure is removed, and the mortgage is restored to its performing status. This action is reported to credit bureaus, changing the loan’s status from delinquent to current, which can halt further negative reporting related to missed payments.
While a reinstatement does not erase the historical record of past delinquencies, it mitigates ongoing damage to credit score. The credit report will still show the period of missed payments, but the updated current status demonstrates the borrower has resolved the default. Consistent on-time payments following reinstatement will positively contribute to the credit history, helping to rebuild creditworthiness.
The loan’s principal balance may see an adjustment post-reinstatement, especially if accrued interest, late fees, and other charges incurred during the default period were capitalized into the loan. This means these amounts were added to the outstanding principal, which can slightly increase the total amount owed over the remaining loan term. While the monthly payment may not change drastically, the overall cost of the loan could increase due to this capitalization.
The escrow account, which holds funds for property taxes and homeowner’s insurance, may be re-evaluated after reinstatement. If there was an escrow shortage due to unpaid taxes or insurance during the delinquency, or if property taxes or insurance premiums have increased, the servicer may adjust the monthly escrow portion of the payment to cover these amounts. This adjustment ensures adequate funds are collected to meet future obligations, preventing future shortages.