Mortgages have a grace period (typically 15 days) during which you can make your mortgage payment without incurring a late penalty. Grace periods can help you avoid late fees that often range from 3% to 6% of your monthly mortgage payment amount.
Mortgages have a grace period—a specific time after your due date when you can still make your monthly mortgage payment without getting hit with a late fee. A grace period can come in handy when a holiday slows down your payment processing or your budget is strained, making it hard to submit your payment promptly.
While a grace period can give you some breathing room when you make your mortgage payments, its a good idea to closely review your mortgage contract to ensure you completely understand your loan terms.
Making your mortgage payment on time each month is crucial for maintaining a healthy credit profile and avoiding extra fees. But life happens, and you may occasionally find yourself facing a late payment. While missing the odd payment here and there hopefully won’t make or break you, it’s important to understand the implications of late mortgage payments.
In this comprehensive guide we’ll walk through everything you need to know about late charges on mortgage loans. including
- When a payment is considered late
- How mortgage late fees are calculated
- The impact on your credit score
- Your foreclosure risk
- What to do if you can’t make a payment
Let’s dive in!
When is a Mortgage Payment Officially Late?
For most traditional mortgages, your payment is due on the 1st of each month. However, you typically have a grace period before the payment is actually considered late. This grace period allows some wiggle room in case your payment is delayed in the mail or banking system.
Here are the key dates to understand
- Payment due date – This is the official due date listed on your mortgage documents, usually the 1st of the month.
- End of grace period – The final day you can make your payment without incurring a late fee. This is usually 10 to 20 days after the due date.
- Delinquency date – The day the payment is 30 days past the due date. At this point, it is officially late and will be reported to the credit bureaus.
As long as you pay within the grace period, you should be fine. But once you hit that 30-day mark, consequences kick in.
How Mortgage Late Fees Are Calculated
When your payment is past due, your mortgage servicer will charge a late fee. This fee is generally calculated as a percentage of your monthly principal and interest (P&I) payment.
For example, if your P&I payment is $2,000 and the late fee is 5%, you’ll be charged $100. Late fees on most mortgages range from 3-5% of the P&I amount.
Some key things to note:
- Late fees cannot exceed the maximum allowed by your state.
- The fee is based on P&I only, not the full mortgage payment.
- On government-backed loans like FHA, VA, and USDA mortgages, late fees are capped at 4% of the P&I.
While a single late fee may not break the bank, repeated late payments add up fast. Get ahead of any potential issues by signing up for automatic mortgage payments through your servicer. This guarantees your payment will arrive on time each month.
How a Late Payment Affects Your Credit Score
In addition to late fees, a delinquent mortgage payment can negatively impact your credit. Generally, your score will take an initial hit of 45-110 points for a single 30-day late payment.
The higher your starting score, the bigger the impact. If you already have great credit, one late payment could knock 70+ points off your score. But if your credit is fair or poor, a 30-day delinquency may only cost you 20-30 points.
The more months you go without paying, the worse it gets. A 90-day late payment is much more damaging than a 30-day one. Beyond 120 days delinquent, your mortgage servicer will likely start the foreclosure process.
Thankfully, a one-time late payment is unlikely to devastate your credit long-term. As you make timely payments going forward, your score will slowly recover. But repeat offenses make it much harder to bounce back.
How Many Missed Payments Before Foreclosure Starts?
You need to be significantly behind on your mortgage before foreclosure comes into play. Most servicers won’t start foreclosure proceedings until you are 120+ days delinquent on your home loan.
Foreclosure is expensive and time-consuming, so it’s always the lender’s last resort. If you’re able to remedy the situation before hitting 120 days past due through a repayment plan, loan modification, or refinance, foreclosure can typically be avoided.
But once you pass that 120 day mark, foreclosure becomes likely. And it can happen much faster in some states than others due to different foreclosure laws.
For example, in Florida the foreclosure process usually spans 120-160 days from the notice of default. But in New York, it drags on closer to 2 years.
The moral of the story? Don’t let payments slide for too long, or you could end up facing foreclosure and losing your home for good.
What to Do If You Can’t Make a Payment
Hopefully you’ll never miss a mortgage payment. But sometimes, life circumstances force your hand. If you’re facing financial hardship and might miss an upcoming payment, here are some options:
Contact your servicer – Letting the servicer know about your situation before you miss the payment shows good faith. They may be able to offer forbearance, a repayment plan, loan modification, or other workout options.
Look into assistance programs – Federal and state programs exist to help homeowners struggling with payments. Eligibility varies, but it’s worth exploring programs like HARP and HAMP.
Consider a refinance – If your financial situation has changed, refinancing to a lower monthly payment could help you stay on track. Shop around for the best rates.
Sell your home – As a last resort, selling your home may be the most practical option if you can no longer afford it. This lets you avoid foreclosure and recoup some equity.
File bankruptcy – Declaring Chapter 13 bankruptcy stops foreclosure proceedings and can eliminate late fees. It also allows you time to sell or refinance the home.
Don’t let fear and shame keep you from taking action on unaffordable payments. Call your servicer or a housing counselor to discuss alternatives for your situation. The sooner you seek help, the more options you’ll have.
Key Takeaways on Mortgage Late Fees
To recap, here are some important points on late charges for mortgage loans:
- Payments are usually due on the 1st and late after a 10-20 day grace period
- Late fees typically equal 3-5% of the principal and interest amount
- A 30-day late payment can knock 45-110 points off your credit score
- Foreclosure starts after 3-4 months of no mortgage payments
- Communicate with your servicer at the first sign of trouble to avoid fees and credit damage
- Refinancing or selling can help you avoid foreclosure if your situation doesn’t improve
Managing the finely tuned machine that is your personal finances can be challenging. Even responsible homeowners sometimes slip up and pay their mortgage late.
Luckily, a one-time late payment here and there won’t cause catastrophic and irreparable harm. As long as you take corrective action and resume on-time payments, you should be able to get back on track.
But repeated late payments or months of missed payments can threaten your financial wellbeing and put your home in jeopardy. Stay vigilant about making your mortgage a top priority so you can maintain good standing on your home loan.
Is It OK to Pay Your Mortgage During the Grace Period?
Its certainly acceptable to pay your mortgage during your grace period. After all, thats what the grace period is for—to make your payment without penalty in case the due date slips your mind or an unexpected circumstance keeps you from paying on time. Thankfully, your grace period can save you substantial money throughout the year, particularly if your late fee is a percentage of your monthly payment amount.
Still, you shouldnt make it a habit to pay your mortgage during the grace period. Relying on this extra time can be risky, as mail and bank processing fees can cause delays that push your payment past the grace period, resulting in a late payment.
Ultimately, your goal should always be to pay your monthly mortgage on or before its due date. Keep in mind, your payment history is the most important factor making up your FICO® Score☉ , the score used by 90% of top lenders. When you pay your debts on time, including your mortgage payment, your timely payments should get reported to the credit bureaus, which can positively affect your credit score. Given the importance of your credit score to your overall financial health, consider setting up autopay for your mortgage payments on or before the due date to ensure a consistent payment history.
What Happens if You Make a Late Mortgage Payment?
Late mortgage payments can have serious consequences for your wallet and your credit score. Significant delinquencies can deliver more severe repercussions, including foreclosure.
If your lender receives your payment after your grace period, theyll likely charge you a late fee. So, if your lender charges a late fee of 5% of your payment amount, youll owe an extra $50 on a $1,000 payment. You could receive an additional late fee if your payment becomes 60 days late. These fees can add up, making it difficult to catch up on your payments.
Once your mortgage payment is over 30 days late, your credit score could drop significantly. Whenever your payment becomes 30 days late, your lender can report the delinquency to the credit bureaus. Remember, your payment history accounts for 35% of your credit score, and each late payment can severely harm your score. Your credit can suffer even more damage if your payment is 60 days late or longer.
Late payments can have significant consequences to your credit, staying on your credit report for up to seven years. Consider scheduling automatic payments to help ensure you never miss a payment.
When is my mortgage payment late?
FAQ
What is the penalty for being late on a mortgage?
How much are late fees on a mortgage?
How much are late payment charges on mortgage?
What is the maximum late fee that can be charged by a lender?
How much is a mortgage late fee?
Many lenders charge late fees equal to a certain percentage of your mortgage payment if you pay late one month. Most late-payment fees are 3% – 6% of your total monthly payment. For example, if you pay $1,000 to your lender every month and you miss a payment, your lender might charge you a $30 – $60 late fee.
How do I avoid late fees on a mortgage payment?
Be sure you know how much you need to pay each month and also put your mortgage payment due date on your calendar. Take note of any grace period, too, since some lenders will give you up to 2 weeks to make a payment before charging late fees. Fortunately, with automatic payments, you can avoid any risk of late fees.
What happens if a mortgage payment is late?
If your mortgage payment is late, the servicer will probably charge a late fee once the grace period ends. Most loan contracts include a grace period of ten or fifteen days, after which the servicer assesses the fee. The servicer can charge late fees only in the amount authorized explicitly by the mortgage documents.
How much is a late payment fee?
Most late-payment fees are 3% – 6% of your total monthly payment. For example, if you pay $1,000 to your lender every month and you miss a payment, your lender might charge you a $30 – $60 late fee. You’ll usually incur this fee every time you miss a payment, so it’s financially beneficial to stay on top of your loan payments.