Autodraft Could Streamline Your Payments and Save You Time

Many people who pay their mortgage manually, whether online, by mail, or over the phone, accidentally pay late from time to time. Late payments not only result in fees, but they can also negatively affect your credit score. A lower score may lead to higher interest rates on future loans, increased insurance premiums and other financial setbacks.

One of the simplest and most effective ways to avoid these consequences is to enroll in autodraft, which ensures your mortgage payment is made on time every month, automatically.

What is autodraft?

Autodraft allows you to set up a recurring mortgage payment that’s automatically withdrawn (“drafted”) from your bank account on a date you choose each month. Once enrolled, your payment is drafted on the scheduled day with no further action needed.

While autodraft offers convenience and may help you avoid late fees, some homeowners might have concerns about automatic payments, particularly if they’re unsure whether enough funds will be available in their bank account at the time of withdrawal.

This article is designed to address common questions and help you feel confident about using autodraft as a reliable payment option.

Why should I enroll in autodraft?

1. Convenience. With autodraft, your mortgage payment is taken care of automatically each month, eliminating one more task from your to-do list. No need to mail a check, call customer service, or log in to make a payment online. It’s a simple, hands-off way to stay current and avoid missing payments.
2. Helps prevent late or missed payments. Try scheduling your autodraft payments a day or two after your paycheck or government benefits usually deposit into your bank account. This helps make sure there’s enough money in your account to cover the payment, giving you one less thing to worry about.
3. You could avoid late fees. If we don’t receive your payment on time, we’ll have to charge you a late fee. Be aware that mortgage late fees can cost up to 5% of your past-due balance. For example, if your past-due mortgage payment is $1,800, then your late fee could be as high as $90. Make it easier to avoid those steep fees by setting up autodraft.
4. Secure payments. Autodraft payments are processed through the Automated Clearing House (ACH), a federally regulated electronic network used by U.S. financial institutions to move trillions of dollars each year. Unlike paper checks, which could be stolen from your mailbox, autodraft transactions are encrypted and leave no physical trail, making them a safer option for managing your payments. If you have an issue with your autodraft payment, the payment is fully protected under federal law. Notify your bank about problems within 60 days.
5. May help protect your credit score. Did you know that making payments on time is the most important factor in your credit score? Late payments can hurt your score, but setting up autodraft helps ensure your payments are made consistently and on time, without any extra effort from you. Remember: Whether or not you have autodraft, making payments on time helps your score. Learn more about maintaining a good credit score here.
6. Easy set-up. You can enroll in bi-weekly, semi-monthly, or monthly ACH payments through your online account. Just Sign in, click on your Loan Number to open Account Details, then go to Payments and select Schedule Recurring Payments. Enter your bank info, hit Save, and you're all set!

Payment intervals: What are my options?

Bi-Weekly Payments

By switching to a bi-weekly payment schedule, you will make 13 full payments (or 26 half-payments) per year instead of the standard 12. This means that half of your monthly payment will be paid every two weeks on a date you choose. This approach aligns with an every-other-week pay cycle making it easier for borrowers with this pay cycle to make mortgage payments as they’re paid. The extra payment each year goes directly toward reducing the loan’s principal balance, which can result in significant interest savings over the life of the loan.

Semi-Monthly Payments

With a semi-monthly payment ACH, you make 12 full payments per year, split into 24 half-payments. Half of the monthly payment is automatically paid twice a month on dates that you choose. This method aligns with a twice-a-month pay cycle.

Monthly Payments

When paying your payments using monthly ACH, you make 12 full payments per year. This aligns with someone who has a monthly pay cycle. While this method is straightforward and widely used, it typically results in higher interest paid over the life of the loan compared to the bi-weekly payment option. Payments are made in full on the same day each month, based on the date selected at closing.

What should you watch out for when using autodraft?

1. Plan Ahead: Make sure your bank account has enough funds to cover your mortgage payment before the scheduled withdrawal date. This is key, as insufficient funds could lead to overdraft fees from your bank, plus insufficient funds or late fees from us. Regular account checks can save you from costly surprises.
   Smart Tip: Keep a financial cushion in your bank account to cover unexpected delays, like a late paycheck. Having a little extra set aside can help you avoid missed payments and potential fees during emergencies.
   Consider Your Timing: If you're currently managing a tight budget, setting up autodraft might not be the best step just yet, and that’s completely understandable. While autodraft can be a great way to simplify your payment and ease financial stress, your financial circumstances should be considered before deciding if this is the right move for you.
2. Set it up correctly. Make sure when you enable autodraft that you have entered your bank account number and routing number accurately. One of the big reasons customers still receive late fees after enrolling in autodraft is that they accidentally entered the wrong account information. Always double check that the numbers are right!
3. Open your mail from Newrez. Take a look at each statement we send to make sure your autodraft payments are going through like they should. It’s a simple way to catch any issues early!

Autodraft is a reliable way to help you potentially avoid late payments and associated fees. As long as you make sure your bank account balance can cover the draft, autodraft could help safeguard your credit score and protect your financial well-being.