Beautiful vintage homes of the historical district in Galveston, Texas.Something came up and money is a little tight this month. Maybe you’re in danger of missing your mortgage payment.

Life throws everyone curveballs every once in a while. The key is not to panic when you get one. If you know you’re going to be late or have trouble making a mortgage payment, give your loan servicer a call. They may be able to help you work out alternative arrangements.

You want to avoid making a late payment because it can have a far-reaching impact beyond your mortgage. Before we get into the real cost, let’s give you some good news.

Grace Period

If you have a traditional mortgage, your payment is generally due on the first of the month. However, there’s a pretty standard practice within the industry that you have until the last chance day on the 16th (or the first business day thereafter) to make your payment without incurring a penalty. This is referred to as the grace period.

Although the 16th is pretty common, you should check with your lender or servicer to see how long your grace period actually is. It may be stated in your loan documentation as well.

Hitting You in the Pocketbook

If you can’t make your payment by the end of your grace period, it’s officially considered late. In the short term, this means you’ll pay a late fee.

The amount of the fee depends on what type of loan you have. In some cases, the amount charged for late payments is also limited by state law.

On most types of loans, the late charge is only applied to principal and interest. Let’s say you have a $1,000 monthly mortgage payment based on principal and interest. If the late charge is 5%, you’re out $50 additional dollars.

Credit Impact

The penalties for not paying your mortgage get worse as the month goes on, according to Quicken Loans Chief Economist Bob Walters.

“If clients don’t pay by the 16th, they incur a financial penalty,” Walters said, “but their credit isn’t yet affected. If they don’t pay by the end of the month, they will be reported to the credit bureaus and this is when a person’s credit becomes damaged.”

The effect of a single late payment on your credit report varies. If you have a particularly high credit score and suddenly miss a payment, you can see a steeper drop than someone with a score of 640 and a few late payments, according to Equifax. Although each credit bureau has its own formula for calculating the scores, the drop may be as much as 90–110 points for an initial missed payment.

Here’s some good news: FICO says one late payment is not a score killer. Your score takes into account late payments only as part of your overall payment history. If you have paid your bills in the past and continue to pay all your bills going forward, you should be able to make up the drop eventually. However, you should know that any late payment will stay on your credit history for seven years.

The credit hit gets worse the more you push the payment back. A payment that’s 90 days late is worse than one that’s 60 days late, which is worse than one that’s 30 days late, and so on. The biggest detriments to your credit are collection items such as bankruptcies, foreclosures and liens.

Although we’ve talked about your mortgage payment up to this point, it’s important to note that the effects are similar if you have something like a home equity line of credit.

Although your payment history is far from the only factor affecting your credit, it’s given the most weight – 35% of your overall score.

Side Effects

So what happens when your credit score drops? The short answer is that it impairs your access to credit. However, it might be more meaningful to take a look at the practical impact.

When you have bad credit, it’s harder to get a mortgage. Even if you get one, you may still have to pay a higher rate. The same is true for car loans.

You may also have trouble opening up new credit cards as well. This includes the cards you can get from retail stores.

There are also effects outside access to credit and money. Employers will sometimes run your credit when you apply for jobs. It can affect your insurance premiums as well.

If a life change causes you to temporarily have trouble making your mortgage payment, the most important thing to remember is to contact your lender or servicer. You might be able to work out a payment plan so that you won’t continue to fall behind and to find a solution that works with your budget. Even if you are on a payment plan but don’t make the contractual payment within the month due, it will impact your credit.

Be sure to contact your servicer with any questions you have regarding your specific situation.

This Post Has 77 Comments

  1. We have a home loan that is pretty new. We just closed on our home February 16 of this year. We have been making our monthly payment on time, we have a 15 day grace period so we always do it before then. We got a bill for this month that says we owe double the amount we usually pay. After checking into it, we were told that our loan maturity date was changed from March 1st (after we moved in) to February 1st (before we moved in). I have statements with the original maturity date of March 1st and I have our closing documents that say March 1st. But, they still say we owe double our monthly payment because we missed a payment… help somebody?!?

    1. Hi Leah:

      I would take that up with your mortgage servicer that you make your payments to. It’s not possible to be responsible for a payment from a date before you closed the actual loan. They don’t get to just change the paperwork. I don’t know what to tell you other than to contact them. If you don’t get a satisfactory answer, you might consider getting an attorney involved.

  2. I am a client of Quicken Loans. I missed a payment back in January of 2016. I have made every payment since then. Im still getting charged 70.26 a month late fee for a missed payment back in 2016. So they told me that when i made the next payment the following month, that was charged to the previous month and there on. I told them my wife had to quit her job and get a job where she makes almost $1800 less a month for health reasons and i wanted to do a loan modification but they told me I couldn’t until my loan was up to date. So I think they just are showing that they are not customer friendly and helping.

    1. Hi Jeff:

      I’m going to get this to our client relations team to look into your issue and see what’s happening here. If there’s anything we can do for you, we’ll absolutely look into all options. I’m sorry you’re having a poor experience. We will be looking into this.

  3. I have a mortgage equity type loan with Wells Fargo. To this day I have never understood why it was set up that way but that’s what it is. They switched “servicing departments” in January and ever since then, this is what is happening. I pay $1150 per month. Since 2006 that payment has been applied to the Principle. Since January, with the new department, I absolutely cannot understand the statement and they are taking $1060.58 and “its going in lala land” and the remaining $89.42 goes to principle I am told. However, my principle balance has been the exact same since January 1. To the cent. When i call them, the rep says “Well, it’s set up that way!!” are you serious? Then when i ask to speak to someone who might actually have an answer, I am put on hold for 40 minutes and then hung up on. I am frazzled. I have spoken to FOUR different people and gotten 4 different answers.

    1. I don’t know what’s going on and I can’t speak for Wells Fargo or whoever is servicing this thing. However, I can give you some general tips. You want to make sure you’re making the minimum payment required based on the original loan term. With that, they’ll apply principal and interest payments based on the original amortization schedule. However, you can also specify that anything extra you pay over and above that amount goes toward principal. Depending on the way their system is set up, you may or may not have to make this declaration every month, but it is an election you can make. Hope this helps!

      Thanks,
      Kevin

  4. My mortgage payment is due on the 1st of the month. ( considered late, with late fee after the 15th). If I make my payment on the 5th of the month, (technically NOT late ) they deduct $28.00 per day from my principle portion of the payment & add $28.00 per day to my interest portion of the payment, making it in essence a late charge of $140.00 ( $140.00 not applied to my balance) Is this standard procedure in the lending community?

    1. Hi Donald:

      This definitely isn’t normal. If you pay within the grace period, they shouldn’t be charging you by putting it on your interest.

      Thanks,
      Kevin

  5. Kevin,
    I have a home equity I am paying and the bank refused electronic payments and electronic access because I do not bank with them. Their statements are very confusing and make no sense. I called them in December and told them I would be paying this off in the 1st quarter. They just said ok. In February I got a call from them out of the blue stating my entire note is due and the statements in the mail increased by $1500. I asked about that to no avail as they stated it was for charges. The past statements and present statements do not match up. I asked for full amount of all principal and interest on loan and then I paid that full amount to pay that off and asked for detailed explanation for charges. Instead I get a statement that took 1500 of the payment and applied to charges I do not agree with and then applied rest to principal and interest. So now I still have principal and interest showing due. I am paying everything off now and noticed they must have did this before in past to cause a late payment. They basically are stealing $2000 from me. What repercussions and options do I have to go back after them? If they did this to me they done this to many more people who may not have been able to pay 4000 in three weeks time. And note when they called out of the blue they seemed giddy like they got me or something? Uh no they don’t. Any suggestions?

    1. Hi Tim:

      I think I might get a lawyer involved in this situation if I were you. You will have to carefully go through your lending agreement and determine what you need to do next. I don’t know what your options might be as I’m not a lawyer of any kind. It sounds like you’ve done everything I would do leading up to this point.

      Thanks,
      Kevin

  6. My mortgage company (Freedom Mortgage) subtract their late fee ($79.00) from my monthly payment, before they credit my payment to my account. This makes my monthly payment short and I receive another late charge for the new month. This all started when they raised my monthly payment due to a shortage in my Escrow account and sent the notice to the wrong address. I didn’t receive a statement with the increase included for seven months, because the had the wrong address. Can the do this?

    1. Hi Dennis:

      It’s very odd that you wouldn’t have received notice of the escrow shortage in the first place. It would go to the same address as the bill. Also, it wouldn’t matter if you had received official notice or not. At some point, your payment should have been changed to make up for the shortage and you should have known. I would ask them what’s going on here and see if you can get an explanation.

      Thanks,
      Kevin

  7. I WOULD BE VERY INTERESTED IN KNOWING WHO THESE PEOPLE HAVE THEIR MORTGAGES WITH, WHEN IT COMES TO THE LATE FEES ISSUE. PERSONALLY MY LOAN IS WITH CHASE. ANYBODY ELSE CARE TO REPLY???

  8. Hello;
    my mortgage bank is charging me $25 every month for Overdue Payment from Dec 2014. until today Aug 2017, i am getting charged $25 a month. is that legal?

    1. Hi Ali:

      I’m not a lawyer, so I can’t really comment on what’s legal. However, I would check the terms of the contract you signed when you signed your loan. I would also strongly consider consulting an attorney.

      Thanks,
      Kevin Graham

  9. My loan was set up on a automatic payment plan, but I had a couple unpaid payments. They stopped taking the payments out and sold the loan to. Another company. The loan was to be paid in full in January of 2017. Now they are telling me that I must pay the amount that was due, plus monthly payment from January to. The present. Can they make me pay these seven extra payments.

    1. Marvin:

      If you don’t make the payments, they’re entitled to collect those payments plus late fees and all the payments necessary to pay the loan off in full. When you didn’t make the payments, it probably changed your amortization schedule.

      Thanks,
      Kevin Graham

  10. I have a home equity line of credit and have an autopay set up to pay it monthly. There is an annual fee of $50 that is billed every April. Unfortunately, the autopay is set up to pay the typical payment due and does not adjust to cover the annual fee. As it is set up on autopay, I’m not reviewing the bill on a monthly basis and as a result, I ended up with a late payment on this account. On my credit report, it shows up as a late mortgage payment. I contested it with the bank noting that the mortgage payment was on time and the only item was the annual fee for the home equity line of credit. They told me it didn’t matter because it was all on the same bill. Does it matter in the world of credit reporting that this shows up as a late mortgage payment or does any late payment have the same effect? Is my reasoning correct in that only the fee is late and not the mortgage and is what they are doing correct and/or legal? In short, is it something to dispute? Thanks.

    1. Hi David:

      If you were trying to apply for a mortgage, it could matter that it was a mortgage payment. Depending on which mortgage type you’re looking at, there are maximum numbers of 30 and 60-day late payments. In the vast majority of cases one late payment in the past year shouldn’t derail an application. That said, it may be something worth contesting as it affects your score. I don’t feel comfortable commenting on what’s legal, because that can vary depending on where you and I’m not a lawyer. I hope this helps a little.

      Thanks,
      Kevin Graham

  11. Hello i have a mortgage payment that is due at the 1 st of every month with the grace period due on or before the 16th day of the same month.. I was unable to make my payment on the 1st of march 2017 and just made it by western union urgent on the 16th of march. I paid extra for it to be sent within minutes I paid cash and was told the money is there now..I received a letter saying my payment was received on march 17th making my payment late? Well my next question is if i have proof I made my payment on the 16th of march and my mortgage company says we did not process it till the next day or for whatever reason. Am I legally late or are they trying to get the extra 35.00 from me because i paid on the last day of my grace period? And next should I send 35.00 by the 1st of April to make sure they do not hit me for the 30 day late mark? What can or should I do? Can they say hey we closed our store hours at 7 pm you sent your payment on the 16th at 9pm so we will not count your payment on time for the 16th because of this even though I have western union paper work showing cash payment was sent and received on the 16th of march? Does the grace period of the 16th mean by midnight then it is offically late..At 12:01 am the 17th Thank you please help..Jim

    1. In terms of late payments and fees every mortgage company has different policies. I can’t really give you a good answer for this. I can tell you that typically if you post bank transactions after 5 PM, they don’t go through until the next day. That’s just from personal experience. In terms of the late fee, the due date depends on what your mortgage documents say. That’s where I would go to find these answers.

      Thanks,
      Kevin Graham

1 2

Leave a Reply

Your email address will not be published. Required fields are marked *