What Happens If I Miss a Mortgage Payment?

The following is a guest post by Kalicia Bateman, a finance editor for Best Company.

When you’ve missed a mortgage payment your mind may immediately spiral to foreclosure.

Foreclosure.

It’s a big, scary word. But, it should bring you some peace of mind to know that foreclosure is not the immediate consequence for missing a loan payment. Foreclosure doesn’t really come up until you’ve missed two or three payments. And by that point, you’ll have hopefully communicated with your mortgage lender to find some other payment solutions. 

That being said, there are certain consequences that you can expect if you miss a loan payment and certain steps you can take to keep your finances in check.

What Happens If I Miss a Mortgage Payment?

If you miss a mortgage payment you can first expect to be charged a late fee. This fee is calculated as a percentage of your monthly payment amount—generally 3 to 6 percent. While one late fee may not seem like a large expense, these fees can quickly pile up if you continue to make late payments and aren’t careful. Make sure you to be aware of what your fees under your mortgage agreement are, so there are no surprises.

Another consequence of missing a mortgage payment is that your credit score will likely take a hit. Most mortgage lenders report to one of the three major credit bureaus (Equifax, Experian, and TransUnion), and making on-time payments is one of the largest factors that makes up your credit score. If you continue making late payments, your credit may continue to suffer which can adversely affect your chances of being approved as a borrower in the future. Although there are ways to improve your credit score, ensuring that it doesn’t take a hit in the first place would be a recommended rule of thumb.

As mentioned before, foreclosure is a consequence, but not one that would take effect immediately. In most cases, lenders will move forward with foreclosure three to six months after your first missed payment. That means that you will have had to miss two to three payments before foreclosure would become an imminent threat. So, it’s important to speak with your lender as soon as possible if you miss a payment or anticipate that you can’t make upcoming payments.

What Should I Do If I Miss a Mortgage Payment?

If you miss a mortgage payment, your first reaction might be to panic, and that’s okay. But, before you let any panic overcome you. You can take some important steps to not only reduce your own stress, but also prevent any large financial repercussions.

1. Contact Your Lender

Before you do anything else, you should contact your lender and communicate with them about your missed payment. Doing so can ensure that you are informed about what will happen next. And it will also open the conversation of finding options if you anticipate that you may not make future payments.

2. Discuss Forbearance Options

Many mortgage lenders may offer forbearance options if you can’t make your mortgage payments for a time. Speak with your lender to see what options are available.

3. Look into Mortgage Relief Programs

If you can’t make your mortgage payments, mortgage relief programs are available to help through the Department of Housing and Urban Development or other local organizations.

4. Consider Mortgage Refinancing

If you’re looking to lower your interest rate and save more on your monthly payments, mortgage refinancing could be a good option for you. While this may not be the best option for everyone, refinancing your home loan could provide you with an opportunity to transition to another type of loan that could better fit your financial situation, such as an FHA loan. And it can also provide you with an increased ability to make your monthly payments.

If you’re unhappy with your current lender or you are just looking for a change, refinancing can also be a good opportunity to look into other top mortgage lenders that can offer you lower rates and more competitive terms. 

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    5. Take Control of Debt and Additional Expenses

    If you’ve missed a mortgage payment, it could be a good opportunity to take stock of your other debts and expenses and consider areas where you could spend less and save more. 

    Consider how you prepared financially to buy your home in the first place and return to those basics. Things like making a budget, scheduling time to update your budget, and cutting out unnecessary expenses may seem like they might not make a big difference, but even these small changes can be beneficial.

    The Bottom Line

    If you’ve missed a mortgage payment, take a deep breath and consider your options. More often than not, taking action and responsibility immediately can save you from a lot of stress and provide you with more options than you may have considered. Remember, lenders are often very willing to work with borrowers and they will work with you to find solutions. So, you can continue making payments and remain in your home.

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