Manage Your Mortgage

How you manage your mortgage can make a big difference in your financial well being.

By Gary Foreman


When you take out a mortgage, you've borrowed money and you have agreed to pay interest to the mortgage company for the amount of money that you owe.


On all but a few mortgages, you'll make monthly payments, part of which will go towards the interest that's owed for that month. Another part of the payment goes to repay the amount borrowed, which is called “principal.”

The mortgage payment may also include an “escrow account.” The mortgage company collects an extra amount each month from you so that when your homeowners’ insurance or property taxes are due, they can be paid from money in escrow. If there isn't enough money to pay for insurance or taxes, you will be asked to make up the difference and increase the amount that you deposit in the escrow account each month.

Another part of your mortgage check could go to “private mortgage insurance” (PMI). If the down payment on your home was less than 20 percent, you were probably required to buy PMI. It protects the mortgage company if you default on the loan.

Paying More Each Month
If you want to pay off your mortgage by increasing your monthly amount, you will have the choice of adding to the to the principal or the escrow. The answer is that it depends on what you want to accomplish.

If you think your account won’t have enough in the escrow account – perhaps your property taxes just went up – you should put some extra there.