What Happens If You Miss a Mortgage Payment?

There are many reasons why a homeowner may miss one of their monthly mortgage payments. They may have been laid off from their job and not have the money, or they may have just forgotten to enable auto-payments, leading to a missed mortgage payment. Missing a mortgage payment may seem like the end of the world at first, but mortgage lenders can actually be more lenient than most homeowners expect. Here is what homeowners need to know if they miss a mortgage payment and how it will affect them.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

The Payment Is a Few Days Late

Most mortgage lenders have a policy in place for a grace period that lasts a few days after the payment is due. If the mortgage payment is submitted during this grace period, then the homeowner won’t incur any penalties. However, how long the grace period lasts and if there is a grace period at all will depend on the mortgage provider. Homeowners need to find out their lender’s terms before assuming there is a grace period.

The Payment Is 15 Days Late

Once a mortgage payment is late by 15 days or more, heavier penalties set in. The penalty for being 15 days late is typically just a fee, but these fees can be expensive. On average, the late fee will be 5% of the total cost of the mortgage payment. While this may not seem expensive at first, it can add up quickly if the homeowner forgets to pay their mortgage regularly.

The Payment Is 30 Days Late

After a month has gone by, the penalties a homeowner will incur are even more severe. On top of the late fee from being 15 days late, the homeowner will also see their credit score drop. Homeowners should avoid anything that makes their credit score drop drastically because it can take a very long time to get it back to where it was. On top of that, the better the homeowner’s credit was at the time of the late payment, the higher the credit score drop will be. Those who have scores of 780 or higher often see the largest change.

The Payment Is 90 Days Late

Once it has reached the point where the payment is three months late, there are severe consequences. On top of the late fee and credit score drop, homeowners can also expect to have their homes foreclosed. While banks don’t typically like foreclosing homes, they will do it if too much time goes by without a payment. The first sign that a home is being foreclosed is receiving a notice of default. After this, the homeowner will have 90 days to catch up on their late payments.

What Should You Do If You Know You’ll Be Late This Month?

If a homeowner knows they will be unable to pay their mortgage in advance, the first thing they should do is contact their mortgage lender. Many mortgage providers are willing to work with their clients if they’re given the proper notice ahead of time. Some homeowners may qualify for forbearance, which is an agreement between the homeowner and lender that suspends mortgage payments temporarily. The mortgage lender can also assist the homeowner in looking for government assistance or restructuring their mortgage so the payments are more easily affordable.

No one wants to be late on their mortgage, but sometimes, it’s inevitable. To be prepared, all Lightner Creek Village homeowners need to understand their mortgage lender’s terms and conditions regarding late payments. While the things listed above are what’s commonly found in loans, they aren’t the criteria for all loans.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.