Making a late payment could happen to almost anyone. However, late mortgage payments can have serious consequences to a person's credit score and finances. Homeowners have a few options to handle a late payment, depending on the cause. People should know what constitutes a late payment, and how it may affect their credit or their ability to repay the loan. With the answers to these questions, homeowners will be able to identify problems related to late mortgage payments, as well as how they can address them.
1. What Is a Mortgage Grace Period?
Most mortgages include a grace period in which borrowers can make a payment without worry about late fees or effects to their credit report. Homeowners must check the details of their loan, as the grace period may vary. In most cases, the grace period will be 10-15 days. This means that if the mortgage is due on the first of the month and has a grace period of 15 days, people have up to 15 days to make that payment. Usually, making a payment past the grace period but before it is 30 days late incurs a late fee, also specified in the loan documents.
2. When Is a Mortgage Considered Late?
Although the grace period allows a brief respite from penalties related to late payments, payments made during that time may still be considered late. It is common for lenders to make payments due at the first of the month. Any payment after that is considered late, for the purposes of tracking legal notifications about the late payment. However, the lender is not required to report the payment as late to the credit reporting agencies until it is at least 30 days behind. Usually, the account will be considered late until the outstanding balance is paid. This means that if someone skips a payment one month and pays the next one on time, they will still be reported as late until all payments are caught up.
3. Is It Better to Make a Partial Payment or None?
In a world of loans with minimum payments, partial payments may not be very effective. Borrowers often try to set up a partial payment program with a lender as a way to better track their budget with biweekly paychecks, but that presumes that the full amount will still be paid each month. Lenders typically do not allow occasional partial payments, especially those not negotiated in advance. When homeowners realize that they cannot make the payment in full, they may want to consider contacting the lender instead of making a partial payment. Paying half or two-thirds of what is due will not bypass late fees or late payment reports to a borrower's credit.
4. What Happens When a Mortgage is 30+ Days Late?
Once homeowners reach the 30-day threshold, the potential consequences continue to accumulate. As a general rule, being at least a month late on the mortgage will incur a late fee and a negative report on the borrower's credit history. This can drop a homeowner's credit score by up to 100 points, and may show up on the report for up to 7 years. If the person fails to catch up on the payment, the lender may continue to add fees and report 60 days late on the credit.
Lenders typically cannot start the foreclosure process until the payment is at least 90 days late, but homeowners should take action long before then. If people are unable to make the payments due to a serious change in their financial situation, they should attempt to contact their lender to discuss options. These choices may include:
- negotiating a loan modification with the lender
- refinancing the mortgage to a lower payment
- preparing to sell the home
The sooner they start, the more likely they are to find a situation that works.
5. Can Homeowners Avoid Consequences From Late Payments?
The only way that borrowers can avoid any consequences of late mortgage payments is to make payments on time, every month. If someone fails to make a payment by accident, they can reduce the risk of problems by catching up during the grace period. When they miss this period, they will face at least a late payment, and possibly some damage to their credit.
Ultimately, the best approach depends on the reason for the late payment. If a borrower is simply overwhelmed by the mortgage each month, it may be better to try to sell the home or negotiate a loan with terms that are easier for the homeowner to meet. This can help minimize the chances that the problem will continue to happen in the future. One late payment on occasion is typically not as damaging to a person's credit than late payments every few months.
Late mortgage payments can become a big problem if Roma Hills homeowners in Henderson do not take them seriously. By acting quickly, they can reduce the damage and help keep their financial situation in better control.
Debbie Drummond is a Full Time Realtor with over ten years experience in the Las Vegas Real Estate Market. She and her team of Real Estate Pros offer the highest level of service. If you’re buying or selling a Las Vegas home, call (702)354-6900 or email Debbie@LVHomePro.com. They’ll be happy to assist you in your move.