A single missed mortgage payment has the potential to reduce your credit score significantly, often by 50 points or more. Typically, if a payment is unpaid for 30 days, it gets flagged as “late” and is communicated to credit bureaus.
Establishing automatic payments from your bank account is the most effective method to guarantee punctual mortgage payments. Nevertheless, there are times when financial difficulties arise, causing you to make a late payment. Let’s examine when a delayed mortgage payment is reported. (Tip: it’s not immediately after your payment deadline.)
When is your mortgage payment considered late?
The majority of mortgage repayments are expected on the first day of each month, unless stated differently in your loan contract. If payment isn’t made by this date, here’s a general overview of what occurs:
Days 2-15: This is your period of leniency. Making a payment now will prevent any late charges or negative credit reports.
Days 16-30: Additional charges might be incurred, but there will be no notifications sent to the credit reporting agencies.
Day 31: Your payment is marked as 30 days overdue and is relayed to credit reporting agencies.
Day 36: Your mortgage loan servicer will reach out to you regarding your payment.
Day 45: An individual will be designated to assist you in navigating your available financial assistance options. Additionally, you will obtain a formal notification regarding your loan’s overdue status.
Day 61: Your payment has been noted as being “60 days overdue.”
Day 91: Your payment is marked as “90 days overdue.”
Day 121: The foreclosure process might be started by your servicer.
Numerous financial institutions offer a grace period, allowing you additional time to settle payments without facing late charges. Typically, the grace period for mortgage installments spans 15 days. Therefore, if your mortgage is due on the 1st, you usually have until the 15th to make the payment fee-free.
Once the 15th arrives, your mortgage payment is deemed overdue. You have until the 30th of the month (an additional 15 days) to settle it, along with any applicable late fees, before it is categorized as “delinquent” and reported to credit agencies.
Delinquency can be classified into various stages-30 days overdue, 60 days overdue, 90 days overdue, and so forth. As your account remains overdue for an extended period, it increasingly negatively impacts your credit score and raises the risk of foreclosure.
What happens if you pay your mortgage during the grace period?
Payments made during the grace period are treated as timely. You will avoid late charges, and your credit rating will remain unaffected. Generally, grace periods last for about 15 days, but it’s wise to consult your loan agreement or reach out to your lender to confirm the exact duration.
How late can you pay your mortgage before it affects your credit?
Most mortgage lenders usually inform credit agencies about late payments once they are 30 days overdue. Therefore, if your mortgage payment is scheduled for the 1st, you have until the end of the month (the 31st) to make the payment without affecting your credit rating.
Delinquent payments can appear on your credit history for as long as seven years. Remember that the more prolonged your payment delays are, the greater the negative effect on your credit score.
60 days late: This is regarded as a graver situation than being overdue by 30 days and can negatively impact your score further.
90 days late: Currently, you are dealing with significant harm to your credit rating and the risk of legal proceedings initiated by your lender.
120+ days late: The bank could initiate the process of foreclosure.
If you find it difficult to meet your payment obligations, reach out to your lender right away. They might provide solutions that can prevent harm to your credit and assist you in retaining your property.
What happens if you miss a mortgage payment?
Failing to make a mortgage payment can lead to various immediate and lasting repercussions. Initially, you might face:
Late fees: If you fail to make your payment and the grace period expires, most lenders will impose a late fee. This fee may be a fixed amount or calculated as a percentage of your monthly payment.
Additional interest: Interest on your mortgage continues to build up on the outstanding balance, raising the overall sum you need to pay.
Potential credit reporting: Delays in payment may negatively impact your credit rating.
In the long run, a delayed mortgage payment may result in the following problems: