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No one ever intentionally goes out of their way to miss a loan or credit card payment — sometimes life happens and before you know it, the due date has come and gone and you’re stuck with late fee.
When it comes to missing a payment on your mortgage, however, the consequences can be far more serious depending on how long your bill is past due.
Below, select breaks down what happens when you miss a mortgage payment, and a few things you can do to ensure it never happens in the first place.
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What happens if you miss a mortgage payment?
If it’s just a few days past the due date, you can still make a late payment without it negatively impacting your credit score. Mortgages will typically have a 15-day grace period for late payments, though it’s a good idea to double-check with your lender so you know exactly how much late fees are.
Once your payment is 30 days late — or you miss making it altogether — that’s the point where your credit score can be impacted. Your lender will have to report the late or missing payment to the credit bureaus, and as a result, your credit score could decrease.
Keep in mind that payment history makes up 35% of your credit score and accounts for whether or not you’re paying your monthly credit bills on time every single month. Since this is the most influential factor in its calculation, your credit score could take a serious hit if you miss a payment. Having a lower credit score can prevent you from taking advantage of the best interest rates the next time you need to apply for a loan or line of credit, so it’s important to maintain a healthy one.
If your payment is 45 days past due, the lender will assign a staff member to your loan account to help you learn more about your payment assistance options. By the time you hit the 60-day mark, you’ll incur another late fee and your credit score will likely take another hit since the lender will have to report this missing payment as well.
Once your mortgage payment is 90 days late, your lender will send you a notice that’s known as a demand letter. This essentially states that your payments are late and unless you start paying for the missing ones, the lender will have no option but to begin foreclosure proceedings.
Foreclosure is the process in which a lender seizes a property as a result of the homeowner failing to make their mortgage payments in a timely fashion. It can lead to a very significant drop in your credit score, further hurting your ability not only to be approved for certain credit and loan products but to receive favorable terms on those loans as well.
Beyond that, if you’re late on your mortgage payment by 120 days or more, the lender will schedule a foreclosure sale on your home and you will lose your property.
How to avoid missing a mortgage payment
Some of the same strategies you can use to avoid making late payments on other forms of debt can also be employed to ensure you’re making your mortgage payments on time. Setting up automatic monthly payments, for example, can help eliminate the possibility of missing your due date.
You should also consider other ways to lower your monthly payment so there will be more wiggle room in your monthly budget. Before you close on the house, ask your lender if you can purchase mortgage points. Borrowers can pay for these upfront, and usually the more mortgage points you buy, the more you can lower your interest rate.
bottom line
Generally, it’s best to always avoid missing any form of debt payment. If your mortgage payments go unpaid for a prolonged period of time, the consequences can be dire and you’ll risk losing your home. If you’re concerned about missing a due date, set up automatic mortgage payments so you won’t have to worry about remembering to manually send one out each month.
If you’re just beginning your homebuying journey and need a good jumping off point, Select rounded up a list of the top five mortgage lenders, and ranked Ally Bank as the best mortgage provider with no lender fees, and Rocket Mortgage as one of the best lenders to choose if you have a lower credit score. Check out the list to see even more mortgage lender options.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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