What to do if you missed a mortgage payment

Nobody plans to miss a mortgage payment. While skipping a payment can have some serious repercussions, it is important to pause and remember that we are all only human. Life can sometimes throw unexpected curveballs and missing a mortgage payment can happen. While we hope you are never in this position, let’s explore what to do if you find yourself in this situation and a few ways to get ahead of the situation. Remember, you’re not alone, and there are options available to help you get back on track. So, let’s dive in!

You’ve missed a mortgage payment. What do you do?

1. Stay Calm and Communicate: First and foremost, it’s crucial to remain calm. Missing one mortgage payment doesn’t mean the end of the world or that you’ll lose your home. Reach out to your mortgage professional as soon as possible to explain your situation. They are your ally and want to work with you to find a solution.
2. Understand the Grace Period: Check your mortgage agreement to determine if there is a grace period for missed payments. This grace period is typically a specific number of days after the due date during which you can make the payment without incurring any late fees or penalties. The standard grace period is 15 days but this can vary.
3. Assess Your Financial Situation: Take a moment to evaluate your finances. Understand the reasons behind the missed payment and identify any short-term or long-term challenges. This will help you communicate effectively with your mortgage professional and explore appropriate solutions.
4. Explore Repayment Options: Many mortgage servicers offer various repayment options for missed payments. Here are a few possibilities:

a. Repayment Plan: Your mortgage professional might be able to help you set up a repayment plan. This involves spreading out the missed payment amount over a certain period, adding it to your future payments until the balance is cleared.

b. Loan Modification: In some cases, a loan modification may be an option. This involves modifying the terms of your loan to make it more manageable. It could include extending the loan term, adjusting the interest rate, or temporarily reducing payments.

c. Forbearance: If your financial hardship is temporary, your mortgage professional may offer a forbearance option. This allows you to temporarily pause or reduce your mortgage payments for a specified period. Keep in mind that the missed payments are usually added to the end of the loan term.

d. Refinance: Depending on your circumstances, refinancing your mortgage could be a viable solution. This involves replacing your current mortgage with a new one, potentially with more favorable terms and a repayment plan that suits your needs.

5. Keep the Lines of Communication Open: Throughout the process, maintain open and honest communication with your mortgage servicer. They are there to assist you and want to help you find a solution. Be proactive in providing any necessary documentation and promptly responding to their requests.

6. Seek Financial Counseling: Consider reaching out to a reputable financial counselor or advisor. They can provide guidance on budgeting, debt management, and creating a sustainable financial plan. Their expertise can help you prevent future financial challenges and ensure your long-term stability.

What happens when you miss a mortgage payment?

If you’re past the grace period, late fees will be applied. These are determined by you mortgage agreement, loan type, and state regulations. Typically, this is 4% to 5% of the missed payment. If your monthly mortgage payment is $1,000 and you miss one payment, then the fee will likely be around $40-$50.

How does a missed mortgage payment affect your credit score?

Good news! Even if you are past the grace period, your credit might not be affected by one late mortgage payment. Usually, late mortgage payments aren’t reported to credit bureaus until they are 60 or more days past due. That’s a potential 2-month time frame to get your finances in order and catch up. Be sure to check with your mortgage servicer to know their specific timeline.

After the 60-day mark, it is a very different story. If you have not worked with your mortgage servicer to arrange an alternative such as forbearance or a repayment plan and you are 60 or more days past due, your credit score could be seriously impacted. This is one of the many reasons it is crucial to communicate with your lender. When it comes down to it, the lender doesn’t earn money unless you are able to make your payments. It is better for everyone if they work with you to set up a path forward rather than ending in foreclosure.

Will my bank initiate foreclosure if I miss a mortgage payment?

Not immediately, no. The foreclosure process is a long one. Your mortgage is considered in default after you are more than 90 days late on a payment. Once you hit that threshold, your servicer will contact you to notify you that you are in default. Generally, they will offer 90 additional days to pay off the current bill before initiating foreclosure proceedings.  If you do not believe you will be able to pay off the current bill, contact your servicer as soon as possible to discuss options. Do not wait until the final day to contact them. The earlier you communicate with them, the more likely it is they will be able to work with you to find a solution that fits your needs.

How can you avoid missing a mortgage payment in the future?

If you have consistent cash flow, you can set up automatic bill payments so that you never forget to make the payment moving forward.

If your missed payment goes beyond simply forgetting and you struggle with managing your finances and budgeting properly, you might consider setting up a dedicated bank account for your mortgage funds. You can have your employer deposit a set amount of your regular paycheck into this account. It helps separate your mortgage budget from the rest of your money so you avoid spending it.

Remember, missing a mortgage payment is a temporary setback, and you have options to help you regain financial stability. By staying calm, communicating openly with your mortgage professional, and exploring repayment alternatives, you can work towards resolving the situation. Financial challenges happen to many homeowners, and you’re not alone in this journey.

Reach out to your mortgage servicer today, explain your circumstances, and work together to find the best solution for your unique situation. You have the power to regain control and keep moving forward toward a brighter future.

Stay positive and remember that there is support available every step of the way. You’ve got this!