When is a Mortgage Payment Late?

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The number one rule in life is to always make your mortgage payment on time. It helps you avoid late fees and helps your credit score stay high. But, what happens if you have to make a late payment? Are you penalized? At what point does the lender charge you fees or mark you late on your credit report? We take a look at these answers below.

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What’s a Grace Period?

You might notice on your mortgage note or mortgage statement that you have a grace period. This period could range between 5 and 15 days. It depends on the lender and the chosen program. This is the ‘extra’ time the lender gives you to make your mortgage payment without charging you a fee.

For example, if your mortgage is normally due on the 1st of the month, but you have a 15-day grace period, you won’t incur late fees until after the 16th of the month. So let’s say you make your mortgage payment on the 5th of a certain month. You will not incur late fees and your mortgage will not be reported as in default on your credit report.

Again, it’s very important that you know the exact grace period your lender allows, though. No two lenders have the same grace periods. You wouldn’t want to assume you have a 15-day grace period since that’s the norm, when your lender only allows 5 days. That could be a costly mistake.

How Credit Reports are Affected

There’s one thing that is concrete no matter which lender you use. It’s how your credit report is affected. No one except the lender will know if you make your mortgage payment past the due date if you make it between 1 and 30 days late. If, however, you pass that 30-day mark, the credit reports are alerted and it goes against your credit.

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Your credit score will likely take a huge hit if you do get to the point of going 30 days past your due date. Don’t fall for the myth that one 30-day late payment won’t affect your credit score. It will and the damage could be severe. Of course, how dramatic your scoring is affected depends on where you stand financially going into the situation. If you have many late payments, the missed mortgage payment could be the nail in the coffin for you. If, however, you have great credit leading up to the missed payment, the damage may not be as severe.

What is the Grace Period For?

The mortgage company provides grace periods to help people with different paydays. Let’s say, for example, your neighbor’s payday is the first, but yours is the 15ht of every month. It may be easier for your neighbor to make his payment on the 1st or on time each month. For you, the 15th might be an easier day because that’s when you receive your payment. Of course, your payday could fall anywhere in between those days as well.

The grace period is not meant for you to use to constantly adjust your due date. You should get in the habit of making your payments on time all of the time. Consider the grace period your emergency plan should something happen. It’s a way to save you from having to pay fees for missing the due date. It’s also a way to help you avoid going more than 30 days past due and having your credit pay the price.

Talk to your lender if you are unsure about the grace period your mortgage contains. Of course, if you can avoid using it, you are in the best position. Making your mortgage payment on time is the best thing you can do for your credit and financial life.

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