Avoid Late Mortgage Payments

Late mortgage payments are a serious threat to the stability of your living situation. While most mortgage lenders will provide a brief grace period to allow you to correct the error, being 30 days or more past your mortgage deadline on even a single payment can lead to severe repercussions. These range from an immediate drop in your credit score for a briefly late payment to threats of foreclosure in response to a lengthy delay.

Credit Problems

The three credit bureaus collect reporting information from each of your lenders. In most cases, a lender will report a payment as late after 30 days. Your mortgage contract will determine the exact process for when a payment is officially late, including when late fees can be charged. Even a payment just a few days late may lead to penalties. The longer you wait to pay, the more severe the penalty grows on your credit score. A payment that is 60 days late results in a greater drop in your score, and a payment 90 days late or more can reduce your score by dozens of points. This can lead to difficulty getting other types of loans, such as auto loans or student loans.

Rate Increases

When your credit score drops, any adjustable rate loans you currently have may go up in cost. This will be reflected nearly immediately in a home equity line of credit, if you have one, since this credit line is attached to the home. If you happen to have an adjustable rate mortgage, a number of late payments on this mortgage can falsely inflate the interest on your home. A lender will typically adjust rates only once or twice a year. However, a borrower who is missing payments may find rate increases coming at shorter intervals, making the mortgage more expensive by the month.

Mortgage Delinquency

In situations where the effects of a missed payment are not immediately resolved, they can lead to a delinquency. Delinquency is explicitly defined in your mortgage contract, but it typically refers to several missed payments in a row. In this case, the lender will take action to immediately resolve the situation. This can include legal action against you. Instead of ignoring the problem, you should be proactive in working out a solution to bring your loan current. Contrary to what many borrowers think, lenders do not want your loan to fail. They will typically be willing to work out a plan with you in order to bring the delinquency current.

Mortgage Foreclosure

If you cannot find a way to resolve your delinquent mortgage sufficiently, the mortgage company will eventually move your loan into foreclosure. This process is also outlined in your mortgage contract, and it can occur only if the conditions described in your contract are present. Typically, foreclosure occurs after six or more months of delinquent payments without attempt to respond by the borrower. Once a foreclosure process starts, it is hard to stop. The end result of foreclosure is the loss of your property along with any equity you had in the property.