No one expects life to be smooth sailing. Everyone hits the occasional hidden rock or shoal, causing upsets to the operations of the vessel. The recent pandemic is a prime example. Many lost jobs as businesses closed down and this forced them to rethink financial priorities. A common question asked during financially straining times is, “Does it really matter if I miss a mortgage payment?”

Late or missed mortgage payments can have far-reaching consequences. It is always better to contact your lender right away if you know you will have trouble paying your mortgage payment. They can suggest options to help you get by without damaging your good credit and payment record.

When Is My Mortgage Payment Considered Late? 

Every mortgage loan will have a specified date when each monthly payment is due, on the same day of each month. There may be some variations if your closing date fell on a date that varies between months (the 31st, for example). Many lenders solve this by making mortgage loans with payments due on the first day of the month.

There is typically a period of time after the actual due date before a payment is considered late, called the “grace period.” This time frame will be specified in your mortgage agreement. Most are for 10 or 15 days. So, your actual due date can be the 11th or 16th of the month.

However, it is not a good habit to pay within this grace period. Late mail or banking holidays or other technical issues can make your payment fall beyond this period, and incur you a late fee. It also gets recorded on your credit that you have a late payment. Avoid these complications by scheduling your mortgage payment on the due date, or even a few days prior.

What Happens When My Mortgage Payment is Late? 

Payments beyond the grace period and into the penalty period incur consequences. The least of these is now owing a late payment fee, and there may be other processing fees specified in your mortgage contract. Sometimes your late fee is a percentage of the payment owed, such as a 5% fee. In some cases, late fees are set by state law.

If your payment is over 30 days late, the late or missed payment is reported to the credit bureaus. This has a negative impact on your credit and causes trouble if you try to qualify for new loans, lines of credit, or mortgage refinancing.

How Does a Late Mortgage Payment Affect My Credit? 

The exact impact a late mortgage payment can have on your credit score varies. A relatively high score can see a much more dramatic impact from a late or missed payment. A single late payment may not tank your credit score, especially if you have a solid credit history up until now. The single misstep is only one aspect of your overall history. Over time, it can be made up pretty easily. However, the credit bureaus report a late or missed payment for up to seven years.

The later the payment becomes, the impact increases. For example, 60 days past due is worse than 30, and 90 is even worse than 60 and so on. This shows a poor payment record overall and impacts your entire credit score, not just the account that is past due.  You should remember that payment history is the single largest category affecting your credit score, 35%. Payments that become 60 or 90 days past due also put you in danger of more severe penalties, and even possible foreclosure.

When Should I Be Worried About Foreclosure? 

Your mortgage agreement will specify the consequences of missed payments and exactly how many you can miss before foreclosure proceedings begin. It is important to know your particular formula, because it can be triggered by as little as one payment overdue or up to several, or depend on how late a payment is overdue.

Foreclosures can be expensive for lenders, and no one wants to force a family from their home, so the proceedings can be extended for any number of reasons. However, you should not bank on a set number of days or months before foreclosure begins. The best course of action is to make on-time payments.

If problems do arise, contact your lender immediately and explain your situation. They can often offer ways to continue at least partial payments and keep your mortgage up-to-date without penalties or other consequences.

Better Rate Mortgage has the best rates, fastest loan closings, and superior customer service to help you select the best mortgage or refinancing loan for your needs. Contact one of our loan experts with your questions about mortgage loans or start our Home Purchase Qualifier now!