What Happens If You Miss One Month Mortgage Payment?

Missing a single mortgage payment can feel overwhelming, but it is a common occurrence for many homeowners. Understanding the typical sequence of events and available options can help navigate this situation effectively. This article provides clear information on the implications of a missed mortgage payment and outlines steps to consider.

Immediate Financial Implications

Missing a mortgage payment triggers immediate financial consequences. Most mortgage lenders provide a grace period, typically 10 to 15 days, following the payment due date. During this timeframe, borrowers can submit their payment without incurring a late fee. If the payment is made within this grace period, it is generally not reported as late to credit bureaus.

Once the grace period expires, lenders assess late fees. These fees are calculated as a percentage of the overdue principal and interest, commonly 3% to 6% of the monthly payment. For example, a $1,000 monthly payment with a 5% late fee adds $50. These fees accumulate with each missed payment.

If payment becomes 30 days or more past due, lenders report the delinquency to credit bureaus. This negatively impacts a borrower’s credit score, with a single missed payment potentially causing a drop of around 50 points. The severity of the credit score reduction can be greater for individuals with higher initial credit scores. A late payment remains on a credit report for up to seven years, though its impact lessens over time with on-time payments.

Communicating with Your Lender

Contacting your mortgage servicer quickly, even before the grace period ends, can prevent further issues. Lenders prefer to work with borrowers to find solutions rather than initiating default proceedings.

Before contacting your lender, gather information like your mortgage account number, the reason for financial hardship, and its estimated duration. Have financial documents, such as income statements or expense records, ready as the lender may request them.

During the conversation, inquire about available options. Be transparent about your financial situation and ability to make future payments. This discussion helps understand potential assistance and prepare for addressing the missed payment.

Exploring Assistance Options

After communicating with your lender, several “loss mitigation” options may be available to help manage a missed mortgage payment and avoid foreclosure. A repayment plan allows borrowers to spread their overdue payments over several months. For example, if three payments were missed, a portion could be added to regular monthly payments for a set period, often six months, until the arrears are caught up. To qualify, borrowers need to show a temporary hardship and demonstrate the ability to afford both their regular payment and the additional repayment amount.

Forbearance provides a temporary suspension or reduction of mortgage payments. This arrangement is intended for short-term financial problems and typically lasts between three to six months, with possibilities for extension up to a year. While payments are paused or reduced during forbearance, the missed amounts still accrue and must be repaid later, either as a lump sum, through a repayment plan, or by modifying the loan.

Loan modification offers a permanent change to the terms of the mortgage. This can involve reducing the interest rate, extending the loan term (for instance, from 30 to 40 years), or a principal reduction, to make monthly payments more affordable. Lenders consider modifications when the cost of modifying the loan is less than the cost of a potential default. Applying for these options typically requires submitting a formal application and providing financial documentation to prove the hardship.

Escalation of Missed Payments

When missed mortgage payments accumulate, consequences intensify. After 60 days, another late fee is assessed, and the delinquency is reported as 60 days late to credit bureaus. Once a payment is 90 days past due, the account is marked as defaulted, resulting in credit damage.

Lenders may send notices of default following continued non-payment. These notices signify the borrower has breached the mortgage agreement. Many mortgage contracts contain an acceleration clause, allowing the lender to demand the entire outstanding loan balance, including accrued interest, be paid immediately if certain conditions, such as missed payments, are not met. This clause is triggered after two or three missed payments, though it can vary by contract.

The ultimate consequence of prolonged non-payment is the initiation of the foreclosure process. Federal law prohibits the legal foreclosure process from beginning until a borrower is at least 120 days behind on mortgage payments. Once initiated, foreclosure is a multi-step legal process that varies by state and takes time, often six months to two years.