It happens to the best of us—life throws a curveball, and unforeseen expenses keep you from making your mortgage payment on time or in full.
What happens if you can’t pay your mortgage and you end up missing your payment date? A missed mortgage payment doesn’t seem like a huge deal on the surface. After all, on-time payments are only one of the factors used to determine your credit report score, right?
In reality, missed mortgage payments can wreak havoc on your financial health. In this article, we’re discussing what happens if you miss a mortgage payment, covering the grace period, potential consequences, the number of payments you can miss, and your options for righting the ship.
Luckily, mortgage lenders can be understanding of temporary financial issues. Enter the grace period.
While not all mortgage lenders offer one, a grace period is a window after the due date when you can make a late mortgage payment without incurring a penalty. Let’s explore how this could look in reality:
- Your monthly mortgage payment is due by the first of each month—or the following business day if the first falls on a holiday or weekend.
- You can’t pay by the first of this month, but your mortgage lender offers a fifteen-day grace period, giving you until the sixteenth to make your payment without having to pay a late fee.
- You pay on the fourteenth, taking advantage of the grace period and avoiding any consequences.
There are a few things to keep in mind about the grace period:
- Not all lenders offer one.
- Not all lenders offer the same duration.
- Grace periods aren’t available to all borrowers.
- Some lenders have a three-strike system, revoking the grace period after three uses.
You can also ask your lender for a mortgage forbearance, which is similar to a grace period. However, a mortgage forbearance isn’t necessarily recommended as you are still responsible for any interest or fees accrued during the forbearance period.
Potential Consequences of Missing a Mortgage Payment
If financial hardship strikes and you can’t make (or don’t have) a grace period, you’re likely to wonder, “What happens if I miss a mortgage payment?”
It’s important to remember that missing only one monthly payment—paying it past the due date and after the grace period expires—usually isn’t catastrophic. However, if you repeatedly miss payment due dates or simply stop paying your lender, you could experience any of the following consequences:
- Credit impacts, including a reduction in your credit score, difficulty securing new loans, increased insurance premiums (for any of your active policies)
- Accrual of late fees (stipulated in your mortgage agreement)
After three missed mortgage payments, your mortgage loan servicer will send what’s called a demand letter. The demand letter serves as a notice to either pay your mortgage balance so it’s up to date or face foreclosure proceedings. Once you reach four late payments and have not made a payment arrangement with your lender, these foreclosure proceedings will start.
Before any of these consequences become a reality, it’s crucial that you explore your options if you won’t be able to make a monthly payment on time. We’ll discuss these options in a later section.
How Many Payments Can You Miss on a Mortgage?
After a certain number of missed payments, you begin to incur various consequences or additional costs:
- You could be charged a late fee after just one late payment.
- Your credit score could decrease after just two missed payments.
- You could experience foreclosure, depending on a variety of factors.
Your lender and local courts likely won’t foreclose and repossess your home after just one missed payment—as long as you make a payment within 120 days, in most cases.
However, missed payments aren’t the only factor to consider if you think you’re at risk of foreclosure:
- Your lender’s risk – If your mortgage lender’s portfolio includes mostly high-risk loans, they’re more likely to begin the foreclosure process earlier, even if your loan is considered low-risk.
- How late your payment is – If you stop paying your mortgage altogether, failing to catch up within a certain time period could lead to foreclosure.
- Your local housing market – In many cases, foreclosures must be approved by a court in your jurisdiction. If your lender files for a foreclosure hearing, but the court is backed up with other cases in your neighborhood, it may take time for your case to close, giving you more time to get current.
Your Options if You’re Missing Mortgage Payments
If you expect to miss a payment, talk to your mortgage servicer as soon as possible so you don’t end up behind on mortgage payments. They can provide a variety of options for making your payment without incurring penalties, like refinancing or loan modification.
If your mortgage loan servicer can’t help, consider turning to a sale-leaseback program as an alternative solution..
A sale-leaseback lets you convert the equity you’ve earned on your home to pay off your existing mortgage. Here’s how it works:
- You sell your home receiving your equity in cash
- You stay in the home as a renter, paying monthly rent
- For many programs, you can choose to buy your home back when you’re ready or to sell it on the open market
Equipping You With Finances from Your Hard-Earned Equity
Missing a monthly mortgage payment can happen to anyone, but can also be detrimental to your financial status. You should take care to avoid missing payments by taking advantage of your mortgage servicer’s grace period, asking your lender for assistance, or using your home equity to get back on track.
Anyone can miss a mortgage payment, but missing one can be detrimental to your financial health. If you miss a mortgage payment, figure out what your grace period is, understand the potential consequences and the number of payments you can miss, and put steps in place to get back on course.
Rocket Mortgage. The Hidden Costs of Late Mortgage Payments. https://www.rocketmortgage.com/learn/cost-of-making-late-payment-on-mortgage
Experian. How Long Does a Late Mortgage Payment Affect Your Credit?. https://www.experian.com/blogs/ask-experian/how-long-does-a-late-mortgage-payment-affect-your-credit/
Investopedia. How Many Mortgage Payments Can I Miss Before Foreclosure?. https://www.investopedia.com/ask/answers/081516/how-many-mortgage-payments-can-i-miss-foreclosure.asp
Rocket Mortgage. Need Mortgage Help? Here Are Your Options. https://www.rocketmortgage.com/learn/need-mortgage-help-here-are-your-options