Coupon Book

Definition

A coupon book is a booklet issued by a mortgage lender to a borrower. It contains a series of detachable, preprinted tickets (coupons) that list the borrower’s mortgage account number, required payment amount, and payment due date for each month. By sending the applicable coupon along with the monthly payment, the borrower ensures correct payment tracking and processing by the lender.

Examples

Standard Mortgage Payment: Sarah recently purchased a home and obtained a 30-year mortgage from her bank. The bank provided her with a coupon book that contains 360 coupons, one for each month for the duration of her mortgage. Each coupon specifies her monthly mortgage amount, and when Sarah mails in each with a check, she stays on track with her payments.
Catch-Up Payments: John missed a couple of mortgage payments due to unforeseen circumstances. His lender provided him with a revised coupon book that includes new, adjusted payment amounts so that he can catch up on the missed payments over several months.

Frequently Asked Questions (FAQs)

What is a coupon book?

A coupon book is a booklet provided by mortgage lenders to borrowers, containing preprinted coupons that indicate the account number, payment amount, and due date for monthly mortgage payments.

How does a coupon book benefit a borrower?

A coupon book simplifies the mortgage payment process for the borrower by providing clear, accurate payment details each month, reducing the chances of missed or incorrect payments.

What should I do if I lose my coupon book?

Contact your mortgage lender immediately. They can provide a replacement coupon book or offer alternative payment methods, such as online payments or automatic bank drafts.

Can I use a different payment method even if I have a coupon book?

Yes, most lenders offer alternative payment methods like online payments, phone payments, or automatic bank drafts. Contact your lender to set up an alternative payment method if you prefer not to use the coupon book.

Is a coupon book used for other types of loans?

While most commonly associated with mortgages, coupon books can also be used for other long-term installment loans, such as auto loans, where regular monthly payments are required.

Amortization Schedule: A detailed table of payments showing the breakdown of each payment into interest and principal, provided throughout the life of the loan.
Escrow Account: An account set by the lender to pay property taxes and insurance premiums automatically out of the borrower’s monthly mortgage payments.
Principal: The amount of the loan outstanding that must still be repaid, excluding interest.
Interest: The monetary charge for borrowing, typically expressed as an annual percentage rate (APR).

Online Resources

References

Harris, Charles E. Understanding Mortgage Loans. New York: Financial Times Press, 2018.
Smith, Jennifer. Managing Your Mortgage: Tips and Tools. Boston: Real Estate Publishing Co., 2019.

Suggested Books for Further Studies

Wasserman, Barry. Real Estate Finance and Development. Chicago: University of Chicago Press, 2017.
Johnson, Rebecca. The Mortgage Handbook: Navigating the Borrowing Process. San Francisco: SAGE Publications, 2020.
Wells, Lionel. Financial Planning for Homeownership. Austin: Greenleaf Publishing, 2016.

Real Estate Basics: Coupon Book Fundamentals Quiz

### Why is a coupon book issued to borrowers by mortgage lenders? - [x] To provide preprinted tickets for tracking and processing payments - [ ] To offer discounts on future mortgage payments - [ ] To keep a record of loan amortization only - [ ] To provide information on interest rates exclusively > **Explanation:** A coupon book is primarily issued to provide preprinted tickets that assist borrowers and lenders in tracking and processing monthly mortgage payments accurately. ### What information is typically included on each coupon in a coupon book? - [ ] Current property value and expenses - [ ] Payment schedule for taxes - [x] Account number, required payment amount, and payment due date - [ ] Insurance premium details > **Explanation:** Each coupon in a coupon book typically includes essential information like the borrower’s mortgage account number, required payment amount, and the payment due date. ### If a borrower loses their coupon book, what should they do? - [ ] Ignore it until the end of the mortgage term - [ ] Call the police - [ ] Request a replacement from the lender - [x] Contact the mortgage lender immediately for a replacement or alternative payment instructions > **Explanation:** If a borrower loses their coupon book, it's important to contact the mortgage lender immediately. The lender can provide a replacement book or set up an alternative payment method. ### How do coupon books simplify the mortgage payment process for borrowers? - [ ] They eliminate the need to make payments - [ ] They decrease the overall payment amount - [x] They provide clear, accurate monthly payment details with detachable coupons - [ ] They extend the mortgage repayment period > **Explanation:** Coupon books simplify the mortgage payment process by providing clear, accurate monthly payment details with detachable coupons that borrowers can send along with their payments. ### Can coupon books be used for loan types other than mortgages? - [x] Yes, for other long-term installment loans like auto loans - [ ] No, exclusively for mortgages - [ ] Yes, but only for student loans - [ ] No, exclusively for short-term loans > **Explanation:** While most commonly associated with mortgages, coupon books can also be used for other types of long-term installment loans, such as auto loans. ### Are alternative payment methods available if a borrower prefers not to use a coupon book? - [x] Yes, methods like online payments or automatic bank drafts - [ ] No, coupon book is the only option - [ ] Only if the borrower has excellent credit - [ ] Only after consult with a financial advisor > **Explanation:** Yes, most lenders offer various alternative payment methods, including online payments and automatic bank drafts, even if they initially issue a coupon book. ### How often do borrowers use coupons from the book? - [ ] Quarterly - [ ] Annually - [ ] Bi-monthly - [x] Monthly > **Explanation:** Borrowers use coupons from the book on a monthly basis to make their regular mortgage payments. ### What is the primary disadvantage of a coupon book? - [x] Potential loss or damage leading to missed payments - [ ] High interest rates - [ ] Lack of funding for property improvements - [ ] Investment risk associated with real estate markets > **Explanation:** A primary disadvantage of a coupon book is the potential for loss or damage, which can lead to missed payments or payment delays. ### Which piece of information is not typically found in a mortgage coupon book? - [ ] Payment due date - [ ] Required payment amount - [ ] Account number - [x] Property tax assessments > **Explanation:** Property tax assessments are not typically found in a mortgage coupon book. These books usually contain the account number, required payment amount, and payment due date. ### In case of missed payments, a revised coupon book would most likely include: - [ ] A total amount due for the year - [ ] New coupon codes for discounts - [x] Adjusted payment amounts to catch-up on delinquent payments - [ ] A list of eligible properties for mortgage > **Explanation:** A revised coupon book provided in cases of missed payments would likely include adjusted payment amounts, ensuring that the borrower can catch up on delinquent payments over a period of time.