You’d think if you missed your mortgage payment due date (usually the 1st of the month) that your mortgage payment is late. That’s not the case though. You have a little longer than you think to get your mortgage payment into your lender before you pay the late fee.
THE GRACE PERIOD
Each lender has their own grace period, so you’ll have to check to find out your exact allotted time. Typically, though, lenders allow between 5 – 15 days after the due date as a grace period. If you make your payment after the 1st, but before the last day of the grace period, you won’t pay a late fee. No one but the lender will know that you made your payment ‘late.’
The grace period helps borrowers that are on different pay schedules get their mortgage payment in on time. Lenders recognize that your mortgage is likely the largest payment that you make each month, so they give you a little forgiveness in getting the payment in on time.
THE LATE MORTGAGE PAYMENT
If you make your mortgage payment after the grace period but before it is 30 days late, you will pay a late fee, but the payment isn’t in default. In other words, your lender won’t report it to the credit bureaus as late. So while your payment will cost you more because you have to pay the ‘penalty fee,’ you still aren’t in default.
Now, if you make your payment more than 30 days after the due date, the credit bureaus will know about it and will mark your account late. It will show on your credit report that you have a 30-day late. If you still don’t make your payment after 60 days, the credit bureau marks you with a 60-day late. If you hit 90-days without making a payment, you are in serious default and run the risk of the lender starting foreclosure proceedings.
STAY IN CONTACT WITH YOUR LENDER
Some lenders start making collection phone calls after you miss your payment by one day. Others wait until the grace period ends to start making their phone calls. If you know you’ll make your payment before the grace period ends, you can let your lender know that and the phone calls will likely stop.
If you can’t make your payment before the grace period expires or more importantly, before you hit 30 days late, then you must get in contact with your lender. Avoiding their phone calls or not getting in contact with them will only make matters worse.
Be honest with your lender. Let them know what you have going on that is making you unable to make your payments. You never know when they may have a program, such as a repayment program, that they can set you up on to help you get current on your loan.
If you don’t contact the lender, they will assume you are going to default on your loan and may take drastic measures, such as starting foreclosure proceedings. Once a lender starts the proceedings, it’s hard to get yourself out of it. Starting early by communicating with your lender is crucial.
While in a perfect world you should make your mortgage payment on or before its due date, you do have that grace period to help give you some leeway. Try to manage your budget so that you can get the payment in before you have to pay a late fee, making your mortgage payment more expensive than it needs to be.