What Happens If You Miss a Mortgage Payment?

Posted by Justin Havre on Monday, February 17th, 2020 at 7:05am.

What to Know About Being Late for Your Mortgage PaymentEvery home buyer who doesn’t pay in cash will need to use a home loan to borrow money from a bank or other lender. There are many types of mortgages that buyers can choose from, but all mortgages need payments to be made every month in order to stay on track. No homeowner ever wants to be late with their mortgage payment, but sometimes things happen that cause a payment to be late. This is what happens if a homeowner is ever late with their monthly mortgage payments and what a homeowner should do if they ever know in advance they’re going to be late.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

Grace Period

In Canada, most mortgage lenders will give the home buyer a 15-day grace period. Even when the mortgage payment is late, if it is paid within those first 15 days, there won’t be any additional penalties toward the homeowner. However, homeowners should try not to rely on this grace period more than they absolutely need to.

Late Fees and Lowered Credit Score

The first big penalty that nearly every lender will resort to is the late fee. The late fee will vary depending on lender, but these late fees will always be harsh. For example, one lender charges $300 for the base late fee but adds on an additional $10 for every additional day that the payment hasn’t been made. Some lenders may even charge a fee for the late payment. It all depends on the lender, so be sure to read through their terms of service.

If a homeowner continues to not pay their mortgage, the next consequence they face will be a hit to their credit score. This can be detrimental because a lot of things are reliant on having credit, such as being able to finance large purchases in the future. 

Rolling Late Payments

It’s possible to be bogged down by late fees incurred from late mortgage payments, especially if the homeowner doesn’t know better. When a homeowner doesn’t pay January’s mortgage payment, February’s payment will automatically be considered late as well. If a homeowner tries to “skip” one month’s payment, it affects every payment they make going forward. This can cost thousands of dollars in late fees after just one year. Homeowners need to stay on top of their payments to avoid unnecessary fees like these.

Check the Lender’s Guidelines

Every lender is different, and that means they’ll have different penalties and different timelines for how they enact those penalties. Before a buyer signs with a particular lender, they should be aware of all of that lender’s different terms. Some lenders have much more strict consequences than others, and this should be a factor in why a buyer chooses one lender over another.

What To Do Before Being Late

As soon as a homeowner knows they’re going to be late with this month’s mortgage payment, the first thing they should do is immediately contact their lender. Many lenders are willing to work with their clients to make it easier for them until they can get the money together. The homeowner and the lender can agree to suspend mortgage payments, or find another solution that would help the buyer. Not all lenders are this lenient, but homeowners who are in trouble should always ask. They can potentially save themselves a lot of money and stress by coming to this sort of solution earlier.

Sometimes a Cochrane homeowner will face an emergency and be unable to pay their mortgage. In these cases, they need to know what the consequences and solutions are for this problem. 

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

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