Can I Pay My Mortgage From a Savings Account?

Many homeowners have wondered at some point if they can pay their mortgage from a savings account, especially when their checking account balance is running low near the due date. It’s an understandable question since we’re used to paying other bills directly from our savings But mortgages tend to work a little differently.

In most cases, the short answer is no, you typically can’t pay your mortgage directly from a savings account. But why not? And what can you do if you need to use savings as a backup source for the mortgage payment? Let’s break it down.

Why You Typically Can’t Pay a Mortgage Directly From Savings

Savings accounts are designed for accumulating money over the long term not for frequent transactions like paying recurring bills. For that purpose checking accounts are better suited. Here are some of the main reasons it’s difficult to pay a mortgage directly from savings

• Limited access – Savings accounts lack the functionality to easily pay bills on a recurring basis. They typically don’t come with debit cards, checks, or other features to make regular payments.

• Transfer limits – Many savings accounts restrict you to just 6 withdrawals or transfers per month by federal regulation. Going over this limit can result in fees or account restrictions.

• Security risks – Providing savings account details directly to your mortgage company introduces potential security vulnerabilities that could put your money at risk.

• Missed payments – Relying on manual transfers from savings increases the chances of forgetting a payment or encountering delays leading to late fees.

Alternative Ways to Pay Your Mortgage From Savings

If your checking account balance won’t cover the upcoming mortgage payment, you have a few options to bridge the gap with savings:

• Transfer to checking first – Initiate a manual transfer from your savings to checking account a few days before the mortgage due date. This ensures the money will be available in time.

• Use a bill pay service – Many banks offer bill pay within online banking that can schedule one-time or recurring withdrawals from savings. Double check for any fees.

• Get a linked debit card – Some savings accounts provide debit cards that let you easily access the funds. Use the card to withdraw cash you can use to pay the mortgage company.

• Use a money transfer app – Apps like Zelle allow you to quickly transfer money between your own accounts. You can move funds from savings to checking and pay the mortgage from there.

• Ask your lender about direct savings transfers – Some lenders can pull payments directly from savings, but availability depends on their processes. Doesn’t hurt to ask!

The key is to first move money from savings to your checking account or payment method intended for frequent billing purposes. This avoids problems like transfer limits while keeping the savings account secure.

Setting Up Automatic Mortgage Payments

Rather than handling each mortgage payment manually, setting up auto-pay through your checking account is usually the best option. Here are some tips:

• Check with your mortgage lender on how to enroll in auto-pay. Many have simple online forms to fill out or let you manage payments through online banking.

• Link your checking account to auto-pay, not savings. This ensures smooth payments each month directly from the correct account.

• Schedule the payments at least 3-5 days before the due date to avoid any delays interfering with on-time payment.

• Monitor your checking account balance in the days leading up to the scheduled withdrawal to prevent overdrafts.

• If needed, create recurring automatic transfers from savings to checking to act as a safeguard for covering the mortgage payment.

Automating the mortgage payment from checking provides reliability and convenience while keeping your savings account protected for other financial goals.

Should You Pay Off Your Mortgage Early With Savings?

While it’s not recommended to pay your mortgage directly from savings each month, you may wonder if you should pay off your mortgage early by making extra lump-sum payments from your savings account. Here are some things to consider:

• Do you have an emergency fund? Don’t deplete savings earmarked for emergencies or other short-term goals to pay off the mortgage faster.

• Weigh investing versus early mortgage payoff – In many cases, investing extra savings can provide higher long term returns versus putting that money toward mortgage principal.

• Calculate interest savings – Determine if the interest rate reduction by paying off the loan early is worth more than potential investment returns.

• Assess fees – Some mortgages charge prepayment penalties if you pay off the balance quicker than scheduled. Factor these fees into your decision.

• Consider your timeline – The longer you have until retirement, the more worthwhile investing likely is compared to accelerating mortgage payoff.

Paying off your home loan faster seems rewarding but also comes with trade-offs. Make sure to run the numbers thoroughly before using your savings to expedite mortgage repayment.

Other Bill Payment Options from Savings Accounts

Mortgages aren’t the only bills you may occasionally need to pay from savings in a pinch. Here are some options for other types of bills:

• Transfer to checking first – Like with a mortgage, transfer the funds from savings to checking a few days before the due date, then pay from checking.

• Use a debit card linked to savings – Withdraw cash at an ATM to pay in person or use the debit card directly if the merchant accepts it.

• Pay with a credit card, then pay off the card from savings – This works well for bills that accept credit cards without fees. Just don’t carry a balance and accrue interest charges.

• Enroll bills in online bill pay – Many banks allow setting up one-time or recurring payments to billers directly from your savings account.

• Arrange for direct savings account withdrawals – Some service providers can pull payments directly from savings once authorized. Check with each company.

• Deliver cash or money order in person – Withdraw funds from savings and pay with cash or money order at the company’s office.

When it comes to non-mortgage bills, you have more options to pay directly from savings in a pinch. But it’s still best practice to use the appropriate checking account designed for transactions.

Key Takeaways

• Paying a mortgage directly from a savings account each month is usually not possible or recommended. Savings accounts lack functionality for convenient recurring payments.

• If needed, you can use methods like transferring money to checking first or bill pay services to access savings for mortgage payments occasionally.

• Setting up automatic payments from your checking account is the ideal option for smooth, reliable mortgage payments over the long haul.

• Using savings to pay off your mortgage early requires weighing factors like investment potential, timeline, fees, and interest savings.

• For non-mortgage bills, options like debit card withdrawals, credit cards, online bill pay, direct transfers, or cash payments provide more ways to leverage savings for payments in a pinch.

The bottom line is that while possible in some cases, paying bills directly from savings on a regular basis is generally not the best practice. With some creative workarounds, you can use your savings as an emergency backup source of funds for mortgage and other important bills when necessary. But ideally, rely on a dedicated checking account and automated payments for smooth billing management.