Making your mortgage payments on time is crucial to keep up with your loan, build credit, and stay in your home. But what happens if you miss a mortgage payment? A single missed mortgage payment could result in late fees and negatively affect your credit, and multiple missed payments could cause you to lose your home in foreclosure.
Key Takeaways
- Missing a mortgage payment can result in late fees and negatively affect your credit score.
- Paying your mortgage by the due date (or within the grace period) prevents late payments.
- Multiple missed payments can result in foreclosure, but there are ways to work with your lender to stay in your home during the pre-foreclosure process.
- Proactively taking steps to avoid missed payments can help you remain in good standing with your lender.
Consequences of Missing a Mortgage Payment
Missing a single mortgage payment can result in negative consequences for your finances and your credit score.
Late Fees and Penalties
If your payment is late, the lender may charge you a late fee as a percentage of the principal and interest owed for that payment (any additional fees or escrow included in the payment are not subject to a late fee). These fees often range from 3% to 6%, and your state may set the maximum percentage that can be charged. Late fees are typically applied after the grace period (more on that in a moment).
Damaged Credit Score
Once your mortgage payment is more than 30 days late, the lender can report the missed payment to the credit bureaus and it will land on your credit reports. A single missed payment can have a significant negative impact on your credit, as payment history is the biggest factor that makes up your credit score. The later the payment goes without resolution, the more damage it can do. Late payments can stay on your credit report for up to seven years.
Grace Periods and How They Work
Mortgage lenders have grace periods that provide borrowers a little wiggle room to make up their payment without penalties.
What is a Grace Period?
Grace periods are a window of time during which you can make your mortgage payment past the deadline without incurring penalties. The length of the grace period depends on the lender, but it’s usually around 15 days after the due date. If you pay within the grace period, you generally will not be charged late fees or see other negative consequences.
What Happens After the Grace Period?
Once a missed mortgage payment is past the grace period, the borrower will likely start to see consequences for missing their payment.
- Late fees. The lender can charge you late fees once you pass the grace period without making your payment.
- Reporting to credit bureaus. Once your payment is 30 days past due, the lender can report the late payment to the credit bureaus.
- Increased pressure from lenders. You may receive a call or letter from your lender about your late payments once your payment is 30 days late.
Consequences of Multiple Missed Mortgage Payments
Multiple missed mortgage payments can have severe consequences, including losing your home in foreclosure.
The Pre-foreclosure Process
Once you miss three consecutive mortgage payments, the lender may start the pre-foreclosure process (the timeline may depend on your lender and where you live). The lender will send you a notice of default and make a filing with the courts so that it is a matter of public record.
During this stage, you may have several options to avoid foreclosure and stay in your home with one of the following methods:
- Make up the missed payments. If you can make your missed payments (or pay a significant amount toward what you owe), you may be able to prevent foreclosure.
- Get a forbearance. You could request a forbearance and temporarily pause payments, paying them back at the end of the forbearance period or tacking them onto the end of your loan period. You may also be able to reduce your payments and spread them over the life of the loan.
- Modify your mortgage. Your lender may modify your mortgage and give you lower payments in exchange for extending the repayment term (which can cost you more in interest in the long run).
- File for Chapter 13 bankruptcy. Filing for bankruptcy may allow you to stay in your home while you work to repay a reduced portion of your debts through a court-ordered process – but it’s not guaranteed that the court will let you stay in your home, and this can cause even more damage to your credit than a foreclosure.
- Deed in lieu of foreclosure. In a deed in lieu of foreclosure agreement, you vacate your home and turn it over to the lender but avoid the foreclosure process. You may be able to have some or all your missed mortgage payments forgiven; your credit score will take a hit, but not as severely as if you had a foreclosure on your credit report.
- Use the acceleration clause. An acceleration clause is a provision in your mortgage contract that lets the lender require you to repay all your outstanding loans if you go into default. Essentially, you would have to repay the entire balance of the mortgage at once. If you can fully repay the loan, you will be relieved of further payments.
Foreclosure
While the timeline depends on the lender and where you live, foreclosure generally starts once the borrower has missed four consecutive payments. The process also depends on where you live. In some states, lenders only file paperwork with the courts to start foreclosure (nonjudicial foreclosure) and in others, every step of the foreclosure process requires court approval (juridical foreclosure).
Once the foreclosure process has begun and approvals are met, the lender will schedule a sale of the property (generally at least two to three months out) and must advertise the property to be auctioned, as well as set an opening bid. Up until the date of the sale, the borrower can still make payment arrangements or pay the amount due.
On the sale date, the property will be sold to the highest bidder. Once the buyer is confirmed and the sale is completed, the deed will be transferred to the buyer who can take immediate possession of the property. If the borrower still resides in the property, they will be ordered to move out with an eviction notice. After the timeline provided by the eviction notice is up, law enforcement may visit the property and remove anyone who has not moved out.
If the property is not sold, the lender becomes the owner and will try to sell the property using a broker or a real estate-owned asset manager. These are often called “bank-owned properties.”
Options to Prevent Missed Mortgage Payments
To avoid late fees, negatively impacted credit, and even the foreclosure process, it’s better to act before you miss a mortgage payment. Here are some ways to prevent missed mortgage payments entirely:
- Contact your lender. Call your lender if you think you are at risk of missing a mortgage payment to work out alternative repayment options or debt relief.
- Modify your loan. Change the terms of your loan to make your monthly payment more affordable (at the expense of increased repayment terms).
- Get a forbearance. Temporarily pause or reduce your payments until you can resume full payments.
- Refinance. If you have strong credit, you can refinance your mortgage to get a more affordable monthly payment with a lower interest rate or a longer repayment period.
Recovering from a Missed Mortgage Payment
If you miss a monthly payment, can act quickly to recover:
- Make up your missed payment. The best way to recover from a missed payment is to pay the lender immediately, along with any late fees you may have incurred. If you make up a payment fast enough, you can avoid further consequences.
- Rebuild your credit. If a late payment lands on your credit report, your credit score will likely be impacted. Use the following steps to build your credit:
- Make all your payments on time.
- Avoid taking on unnecessary debt.
- Keep your credit card balances low.
- Avoid applying for too much credit in a short time frame.
- Check your credit report and get errors fixed right away.
- Sign up for credit monitoring to protect your credit and guard against fraud.
Preventative Measures for the Future
Take these steps to avoid missing late payments in the future:
- Set up automatic mortgage payments to come out of your bank account. Make sure you can reliably predict your cash flow to avoid over drawing your bank account.
- Alternatively, you can set up a monthly calendar reminder to pay your mortgage.
- Create and maintain a monthly budget. Look for ways to save and divert those extra funds toward your mortgage payments.
- Save up an emergency fund so you can dip into your savings when you don’t have the funds on hand to cover your mortgage payment.
Mortgage FAQs
Here are some answers to common mortgage questions.
Is it okay to miss one mortgage payment?
Ideally, you should never miss a mortgage payment. But if you can resolve the matter quickly and pay your mortgage within the grace period or within 30 days, you can avoid the more severe consequences of missing a payment.
Can I lose my home if I miss one mortgage payment?
You will not lose your home for missing a single mortgage payment. Pre-foreclosure proceedings generally occur after three consecutive months of missed payments, and foreclosure proceedings generally occur after 120 days (though timelines vary).
How many days late can a mortgage payment be?
If you make your mortgage payment within the grace period (typically 15 days after the due date) you can often avoid consequences like late fees. After 30 days, your late payment may start to affect your credit.
Bottom Line
Missing a single mortgage payment isn’t the end of the world, especially if you can quickly recover by paying it in full. But the later a missed payment gets, the worse the consequences are. If you miss several payments in a row, you could lose your home. Before that happens, you should contact your lender to see if you can work out an arrangement that allows you to stay in your home.
