Mortgage Grace Period: What Is It And How Does It Work?

In these uncertain times, many Americans are finding themselves in need of some type of financial relief or assistance, especially when it comes to their mortgage. You’re not alone if a federal holiday has caused a delay in your mortgage payment being processed, or if credit card and student loan debt has temporarily strained your housing budget.

If you’re struggling to come up with the funds for this month’s payment, a mortgage grace period can offer some peace of mind.

What Is A Mortgage Grace Period?

A mortgage grace period can be defined as a set amount of time following the deadline of a mortgage payment when any penalties are waived, so long as the payment is made during that time. If the full payment is not made during the mortgage payment grace period, a late fee will be charged, and the missed mortgage payment will be reported to the credit bureaus.

If you don’t pay your mortgage payment on time, you can expect a fee and a possible ding to your credit score – and sometimes it can even mean losing your home. A grace period eases these consequences a bit, ensuring that fees or credit nicks don’t happen right away if you make a late mortgage payment.

How Long Is A Mortgage Grace Period?

The amount of time in the mortgage payment grace period varies by lender, but it’s usually 15 days or 2 weeks. To be clear, you should always pay your mortgage on time if you’re able to, and a grace period does not absolve you of having to make the payment.

It merely gives you a little more time to get it paid before late fees and other negative consequences set in. It’s also a great feature to have if you accidentally forget to make a payment but catch the mistake before the grace period has expired.

When Is A Mortgage Payment Considered Late?

Let’s take the standard mortgage grace period into consideration. If your mortgage payment is due on the first of the month and your grace period is 15 days, your payment would be considered late on the 16th.

If that falls on a weekend, you may have until the following business day to make that payment, but you should check with your lender to verify these terms. On the 16th (or following business day), you will be subject to the relevant penalties.

Is It OK To Pay Within The Mortgage Grace Period?

Yes – you should always strive to make your mortgage payment on or before its due date. The whole idea of a grace period is to allow late payments without consequences, but that doesn’t mean you should rely on it. Grace periods are no doubt wonderful to have. They save forgetful homeowners lots of money each year, especially if their late penalty is calculated as a percentage of their monthly payment.

That said, best practices from a credit score perspective encourage us to make our payments on or before the due date, so always go that route if you can. One way to ensure this is to make payments online to avoid mail and bank processing delays. An even better solution is to enroll in automatic payments so your payments go through every month on time.

What If You Can’t Pay Within The Mortgage Grace Period?

If you’re unable to make your payment when it’s due or even within the mortgage grace period after it’s due, there are a few consequences you can expect when making a late mortgage payment. First off, late fees will be imposed in the form of a flat fee or a percentage of your monthly payment.

This amount depends on your lender, so some get hit harder than others, but we all prefer to avoid fees when we can. Obviously, these don’t go away when the month turns over either, so they can really add up and put a bigger and bigger financial burden on you.

Beyond this, late mortgage payments are a big no-no when it comes to your credit score. After 30 days, your lender will report the late mortgage payment to credit bureaus. Failure to make a timely mortgage payment will land on your credit report and cause your credit score to drop significantly. This will make borrowing in the future more expensive and difficult as you work to repair your credit.

So what do you do if you can’t pay? Talk to your lender as soon as you fall behind on your mortgage payment, tell them the circumstances you’re facing that are preventing you from paying and let them know when you’ll be able to start making your payments on time again.

Mortgage Grace Period: FAQs

Let’s look at the answers to some frequently asked questions about mortgage grace periods.

What is a mortgage grace period?

A mortgage grace period is a designated duration of time after the due date of a mortgage payment that forgives the borrower of any penalties as long as the payment is made during that period. If a payment is made after the mortgage grace period, the payment is considered late and the borrower is subject to penalties.

Where can I find my mortgage grace period?

While there may be information about grace periods on your billing statement, the first thing to do is to look at your mortgage note. The note includes the date of the month that your mortgage is due (usually the first of the month) and whether you have a grace period to pay, among other stipulations. If there is no grace period mentioned on your mortgage note, it doesn’t exist.

Why do lenders offer mortgage grace periods?

To protect borrowers from late fees, many states have laws that make it illegal for mortgage companies to not offer grace periods. In addition, lenders know that different borrowers have different days of the month that they pay their mortgage on, so grace periods take that into account. They also understand that many factors can delay a payment that are not the borrower’s fault.

The Bottom Line: Mortgage Grace Periods Offer Flexibility

Grace periods are a great way to gain a little wiggle room when it comes to paying your mortgage. First, though, you should check your mortgage note to make sure you’re crystal clear on the terms of your loan.

Do the best you can to make your mortgage payment on or before the due date, and if you can’t pay on or before the due date, avoid late fees and negative credit hits by paying before the grace period ends. If you’re struggling to make consistent payments, read more about your options to avoid foreclosure.