How Late Can You Pay Mortgage Without Penalty? (2024)

Struggling to pay mortgage payments is a common issue that can affect anyone. However, understanding what grace period is allowed can give you a few extra days to find the money without incurring a penalty fee or impact on your credit score.

You can usually pay your mortgage up to 15 days late without penalty, however, a lot will depend on your particular mortgage lender and when they submit the information to the credit bureaus.

In this post, I’ll explain some of the penalties you have at different stages of being late on your mortgage payments as well as some options if you are going to be late.

What Happens If You Pay Your Mortgage Late?

Below I’ll run through what may happen at certain lengths of time when you don’t pay your mortgage. This should be taken as general information only as every mortgage lender will have a different escalation and penalty process although this should give you an idea of what could happen.

If you want to know exactly what will happen with your mortgage provider, make sure you read through your documentation or contact them directly.

• 1 Day Late. Being one day late will usually fall inside the face period and nothing will happen. If you do this regularly you may be contacted by the mortgage provider to find out what the issue is.

• 15 Days Late. The grace period with most lenders usually ends after being 15 days late. At this stage your lender may be within their right to charge you a late fee which is usually between 3% to 5% of the missed payment.

• 30 Days Late. If you are 30 days late, you’ve more than likely received the notification of your late payment fee, however, at this stage, your mortgage lender will report your missed payment to the credit bureaus. This will negatively impact your credit score, although the extent will usually depend on the rest of your credit history.

• 60 Days Late. At this point you’ve now missed two mortgage payments and probably received two late fees. The lender has now more than likely assigned someone in the company to your account to start contacting you to understand why you’re missing the payments and if they can do anything to help. Make sure you don’t ignore these calls as they can definiely help and will also avoid them going down the legal route more quickly by issuing legal demand letters and starting foreclosure proceedings.

• 90 days late. Once you start being 3 months late, you may start to receive more serious notices which ask you to pay all mortgage payments and late fees owned to date or face foreclosure proceedings. Foreclosure is where they’ll repossess your property to try and recover their investment by selling your home. This can be avoided if you contact them to try and work out a payment arrangement, just ignoring them will definitely not be appreciated.

• 120+ days late. At this point, the mortgage lender will most likely have issued a final demand letter and have fully laid out what will happen if you don’t pay. Most justifications at this point can start the foreclosure process which will involve serving a foreclosure notice by mail and taping a notice on your door. You can still contact them to discuss payment arrangements and avoid this happening, although may start to incur other fees such as reimbursing the lender’s legal fees from the notices that have been sent.

Remember that you can contact your lender at any stage of the process, no matter how late to discuss payment arrangements, up until they’ve actually sold your home of course. The lender will most likely always prefer this approach as will help avoid them having to go through the expensive process of having to list and sell your home and risk not recovering their full investment.

Is Paying Within A Grace Period Considered Late?

Yes if you pay your mortgage within the grace period but after the due date, it is still considered late. However, if it is only a few days after the due date no action will likely be taken on enforcing penalties or submitting the issue to credit bureaus, although this will depend on the lender.

If you are a few days late regularly, you may be contacted by your mortgage lender to find out why. This could be a genuine reason such as a legitimate mistake or maybe your income arrives on a certain day of the month and you wanted to align it and forgot to make the lender aware. This is usually what a grace period is for, to allow easy to resolve issues from being escalated out of proportion, just make sure to not rely on a grace period as missed payments can cause long term issues.

What Options Are Available If You Cannot Afford The Mortgage Payments?

There are a number of options available if you cannot afford your mortgage payments. Below isn’t every option although some of the most common.

• Contact your mortgage provider. The first step you should take if you can’t meet your mortgage repayments is to contact your mortgage provider. They can take you through some options including temporary payment arrangements that can help reduce your current payment obligations.

• Get financial advice from an independent financial advisor. Speaking to a financial advisor, which can include a mortgage advisor can allow them to fully review your situation and ensure you to understand all of your options. Some countires offer free financial advice for those struggling with debt, as well as some debt charaties.

• Review your household spending. When you review your household spending it can have multiple advantages. You may spot ways you can save money, possibly even immediately, as well as working out how much you can realistically afford for your monthly mortgage payments. Knowing how much you can afford can significantly help with speaking to a financial advisor or your mortgage lender. A significant change in circumstances could be the reason for not being able to afford the mortgage, such as losing your job, so reviewing your budget to understand what you need to cut back on can be very useful.

• Check if you have insurance. If you’ve lost your job or income unexpectedly, make sure to check if you have insurance that could help replace your lost income or help pay for certain things. This could include things like unemployment insurance or long term sickness insurance which can cover lost income. Also, you may have mortgage payment protection insurance which can cover your mortgage payments. If you’re reading this to understand what issues could arise if you were to miss a mortgage payment and don’t have insurance, now could be the time to start looking into it.

• Sell the property. This might be a painful one, however, if you’re struggling to pay your mortgage and think you’ll continue struggling for the foreseeable future, it may be a lot easier to sell your property, pay off your debt and move to a cheaper property.

• Remortgage your property. Whether you’re able to remortgage will depend on a number of factors including your income, deposit and level of expenses, however by remortgaging you may be able to significantly reduce your monthly mortgage payments. For example, if you spread your mortgage over a longer term that should reduce your mortgage payments. If you are considering going down this route, make sure to speak to a mortgage advisor to understand your options.

Impact On Credit Score From Missed Mortgage Payments

If you do miss a mortgage payment and it gets reported to the credit bureaus it will impact your credit score. However, the extent to which it will affect your credit score will depend on whether the rest of your credit report is in a good position.

The main factor that matters on your credit report for how much a late payment will affect your score is the number of successful payments. Credit bureaus usually look at the percentage of successful payments as a metric, with 99% and above usually considered excellent.

This means if you have a lot of credit lines that have been open for a number of years, so have a lot of credit history, one missed payment may not impact you much. However, if you haven’t got much credit history, one missed payment can cause serious long term damage.

For example, if you have had 3 credit cards over 6 years (6 years is usually the maximum period credit bureaus look at), and never miss a monthly payment, that means you’ve got 216 (6 x 12 x 3) successful payments. That means if you were to miss one payment on your mortgage, assuming it’s the first one to keep the maths aligned, you would have 216 successful payments out of 217 payments, meaning a 99.5% successful payment rate. This is still considered excellent for many bureaus.

However, to flip the example and say you only had 1 credit card for 12 months and missed the first mortgage payment, you now have 12 successful payments out of 13, which is only a 92% successful payment rate which is considered poor by many credit bureaus.

Obviously then the more mortgage payments you miss the more damage is done, however, the impact to the person with less credit history is a lot more severe and stays on your credit report for 6 years so very hard to rectify.

If the process does escalate you can also be taken to court and your property repossessed which will have further negative effects on your credit score. This post I’ve written about how long you can not pay your mortgage before foreclosure as well as the various impacts may be useful.

Summary

As you can see, there is a few days’ grace before you start to incur any penalties for late mortgage payments. However, if you are late with your payment beyond a certain threshold the penalties can be quite severe and keep escalating.

Remember that if you do have any questions or any issues, it’s always best to speak to an independent financial advisor or mortgage broker who can help you understand your options. If you are considering speaking to a mortgage advisor, this post I’ve written about what to ask a mortgage advisor may be a useful read.

If you are worried about being able to pay your mortgage, make sure to keep in contact with your lender, they may be able to offer you solutions to avoid anything escalating and becoming an even more stressful situation. Good luck and I hope everything works out.