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Mortgages have a grace period—a specific time after your due date when you can still make your monthly mortgage payment without getting hit with a late fee. A grace period can come in handy when a holiday slows down your payment processing or your budget is strained, making it hard to submit your payment promptly.
While a grace period can give you some breathing room when you make your mortgage payments, it's a good idea to closely review your mortgage contract to ensure you completely understand your loan terms.
What Is the Grace Period for a Mortgage Payment?
In many cases, mortgage payments are due on the first of the month, often followed by a grace period to give you some room before incurring a late fee. The length of this grace period varies by lender, but it's usually around 15 days. If your mortgage is always due on the first of the month, then your grace period should give you until the 16th of the month to make your payment penalty-free.
Making your monthly mortgage payments before the due date is best, but you can still avoid late fees by paying before your mortgage grace period ends. Late fees can range from 3% to 6% of your monthly payment amount.
If you're unsure how long your grace period is, check your mortgage contract or contact your lender to find out the exact number of days your grace period allows for payment before your lender charges a late fee.
Is It OK to Pay Your Mortgage During the Grace Period?
It's certainly acceptable to pay your mortgage during your grace period. After all, that's what the grace period is for—to make your payment without penalty in case the due date slips your mind or an unexpected circumstance keeps you from paying on time. Thankfully, your grace period can save you substantial money throughout the year, particularly if your late fee is a percentage of your monthly payment amount.
Still, you shouldn't make it a habit to pay your mortgage during the grace period. Relying on this extra time can be risky, as mail and bank processing fees can cause delays that push your payment past the grace period, resulting in a late payment.
Ultimately, your goal should always be to pay your monthly mortgage on or before its due date. Keep in mind, your payment history is the most important factor making up your FICO® Score☉ , the score used by 90% of top lenders. When you pay your debts on time, including your mortgage payment, your timely payments should get reported to the credit bureaus, which can positively affect your credit score. Given the importance of your credit score to your overall financial health, consider setting up autopay for your mortgage payments on or before the due date to ensure a consistent payment history.
What Happens if You Make a Late Mortgage Payment?
Late mortgage payments can have serious consequences for your wallet and your credit score. Significant delinquencies can deliver more severe repercussions, including foreclosure.
Late Payment Penalties
If your lender receives your payment after your grace period, they'll likely charge you a late fee. So, if your lender charges a late fee of 5% of your payment amount, you'll owe an extra $50 on a $1,000 payment. You could receive an additional late fee if your payment becomes 60 days late. These fees can add up, making it difficult to catch up on your payments.
Credit Score Damage
Once your mortgage payment is over 30 days late, your credit score could drop significantly. Whenever your payment becomes 30 days late, your lender can report the delinquency to the credit bureaus. Remember, your payment history accounts for 35% of your credit score, and each late payment can severely harm your score. Your credit can suffer even more damage if your payment is 60 days late or longer.
Late payments can have significant consequences to your credit, staying on your credit report for up to seven years. Consider scheduling automatic payments to help ensure you never miss a payment.
Serious Payment Delinquencies Risk Foreclosure
If you become seriously delinquent on your mortgage payments, you risk foreclosure as your lender seeks to recover the loan amount. In this scenario, you should contact your lender immediately to review your options if you miss payments. For example, your lender may allow for a temporary pause on your account to give you more time to make a payment or to get on track financially.
Once your payment is 36 days late, federal law requires your loan servicer to contact you to discuss your options. They must mail your loss mitigation options before your payment is 45 days late. At that point, consider contacting a HUD-approved housing counseling agency that can walk you through the loan modification and refinancing programs that may be available to you. You'll begin receiving foreclosure warnings once your payment is 90 days delinquent, and foreclosure may begin once your account is 120 days late.
Protect Your Payment History and Credit Score
When you forget your mortgage due date or factors prevent you from making your payment on time, it's assuring to know your grace period gives you extra time to make your payment penalty-free. But since late payments can have serious consequences for your credit score, you should make every attempt to make timely payments.
It's also wise to regularly check your credit report for free with Experian to ensure late payments aren't being reported incorrectly or that there isn't inaccurate information on your report. Also, consider checking your FICO® Score to see where your credit stands and to discover ways you can improve your score.