“What happens if I skip a mortgage payment?” is one of those questions we hope you never have to ask, but life is unpredictable: Sometimes no matter how carefully you plan, you may find yourself short on the funds you need to pay this crucial monthly bill. So what happens if you skip a mortgage payment for just one month?
Don’t worry—there’s no need to panic quite yet. But there are consequences to missing a mortgage payment, so you’ll want to know what’s in store.
What if you’re late on your mortgage payment?
Each home loan agreement offers borrowers a grace period for missed payments. Most mortgages are due the first part of each month, however homeowners can select any date they wish. Usually there is a 15 day grace period. Each mortgage holder can have different policies that you the owner must be aware of. One thing to know is when does late fees start to be effective?
If you miss too many payment, typically 3 months then the bank can proceed with pre-foreclosure.
Late fees are based on your mortgage agreement, loan type, and state regulations, but generally the average is 4% to 5% of the overdue payment. So, for a $2,000 monthly mortgage with a 5% late penalty, the fee would be $100. That might seem like a small fee but late fees are a good source of income for mortgage lenders.
How will missing a mortgage payment affect your credit?
Most lenders typically report late payments to credit bureaus after they become 2 months past due—meaning you usually have 60 days to make up for a missed payment. After the 60-day mark though, your credit score (a reflection of how you’ve managed past debts) might take a big hit.
According to data from credit analysis firm FICO, someone with an excellent credit score—780 or above—could see it drop 90 to 110 points if the person has never missed a payment on any credit account. In comparison, someone with a 680 credit score and two pre-existing late payments on his credit report may see a 60- to 80-point drop for a mortgage payment delinquency.
Will my bank start foreclosure proceedings if I miss one payment?
The short answer is not usually.
“The foreclosure process takes a lot longer these days because of the foreclosure crisis [of 2008] Mortgage lenders don’t want to foreclose on your home because it results in a loss or a cost to them.
Nonetheless, your mortgage is technically in default if you’re more than 90 days late on your mortgage payments—even just one. At that point, you’ll receive a letter from your mortgage servicer notifying you that you’ve defaulted on your loan; you then typically have 90 days to pay off your most recent bill before your mortgage lender can begin foreclosure proceedings.
I ‘m unsure I can make next month’s payment. What are my options?
Your first step is to contact your mortgage servicer and explain your financial situation. People often feel like they don’t want to turn themselves in, but you don’t know what your options are until you talk to your lender. Plus, mortgage lenders tend be more accommodating if you notify them in advance that you can’t make an upcoming payment.
You might qualify for a special forbearance, a process where your servicer gives you a temporary break from your mortgage payments.
If you can’t afford to make your mortgage payments (say, due to a layoff or emergency medical expenses), Cecala also recommends looking at the federal government’s Home Affordable Modification Program.
Through HAMP, homeowners who are not unemployed but struggling to make their monthly mortgage payments may lower their monthly payments and make them more affordable and sustainable for the long-term, says the Federal Housing Finance Agency’s website.
How can I avoid a missed payment in the future?
The best way to ensure you won’t miss a mortgage payment is to set up automatic bill pay so that the money is automatically withdrawn from your bank account each month. (You can do this easily through your bank either online or by phone.) You may even want to set up a dedicated checking account for your mortgage payments, and make arrangements with your employer to have a percentage of your income automatically deposited into the account each month.