What happens if I miss a mortgage payment?

illustration of What happens if I miss a mortgage payment?

What’s considered a late mortgage payment?

The date of each monthly mortgage payment  is set by your mortgage lender when you first take out your mortgage. It’s usually the first day of the month, but can vary depending on your agreement.

A mortgage payment is considered late if it’s after this set date, but most lenders give customers a ‘grace period’ to pay the mortgage before late fees are applied. A mortgage payment is officially late when charges or fees are added to your mortgage payment by your lender.

What’s a grace period?

Your lender’s ‘grace period’ is a set amount of time after your mortgage payment is due, during which they won’t charge you a late fee. Grace periods differ between lenders, but are usually within the first five, ten or sometimes as much as 15 days after the due date for the payment. 

For example, if a lender allows a five day grace period then late fees won’t be charged if the payment is received on or before the fifth day after the date the payment is due.

How much are late fees?

Late fees, or ‘penalty charges’ as they’re often called, are fees your lender may charge if you’re late to make a mortgage payment or if your account is in arrears. You’ll be ‘in arrears’ if you owe more than your regular mortgage payment for the current month.

The amount you’ll have to pay for late fees will depend on your lender's own rules about how much they charge, but it can be anywhere from 3% to 6% of your monthly payment. It’s best to discuss these fees with a specialist broker when taking out your mortgage.

What should I do if I can’t make my mortgage payment?

Being unable to meet your monthly mortgage payment can be a worrying and stressful situation. If you think you’re going to miss a mortgage payment, speaking to your lender is really important, and should be the first thing you do.

At the end of the day it’s in the lender’s interests for you to continue your payments, so they’re normally happy to try and find a solution. Often, they can help by providing financial advice and solutions such as: 

  • Arranging a payment plan (often called a forbearance program) where you can make lower payments for a set period of time 

  • Arranging a payment holiday

  • Lengthening your mortgage term

  • Switching your mortgage to interest-only

You may also be advised by your lender to downsize or sell your home to reduce the size of your loan. This can feel scary, but avoids the more serious route of repossession

Your options will always depend on your unique situation. But if you can’t pay your mortgage for a short period of time, your lender may be happy for you to try and get your payments up to date within a few months. However, if your financial problems are longer-term or even permanent then they may put you in touch with their ‘loss mitigation’ team to try and find a solution. 

Falling behind on your mortgage payments by at least three months usually means you’ll have defaulted on the loan and your lender can then start court proceedings and repossess your home. This really is a last resort for most lenders, which is why it’s so important that you get in touch with them as soon as possible to discuss your options and reduce the chance of this happening. 

Start an enquiry with us to speak to a specialist broker who’ll be able to give you the best advice for your situation.

What happens if I’ve missed a payment and get a letter?

If you’re late paying your mortgage you may get a letter from your lender. This can be worrying, but it can usually be resolved if it’s dealt with in the right way. 

The letter will usually be about one of the following:

  • To let you know you’ve missed a payment

  • To let you know you’re in arrears or have defaulted

  • To let you know you’ve got seven days notice of a court action

If you get a letter we suggest you don’t ignore it. It’s best to deal with these things head-on to avoid making the situation worse. Ignoring it could harm your credit score or lead to extra charges and fees which will increase your debts even more. As a last resort, after at least three months of missed payments your lender could also start court proceedings to repossess your home

If you’re worried about missing a mortgage payment, we always suggest speaking to your lender. But for more general advice start an enquiry to speak with a specialist broker.

How will missed mortgage payments affect my credit report?

If you miss a mortgage payment it can affect your credit report in a number of ways. One missed mortgage payment could damage your previously ‘excellent’ or ‘good’ credit score, making it harder to get credit or remortgage in the future. 

The more missed payments you have, the worse the damage to your credit score will be. You should also bear in mind that a missed payment can remain on your credit report for up to seven years. 

If you’re late making a mortgage payment you've got at least 30 days past the due date before it shows on your credit report. You could still be charged late fees though, so it’s best to keep on top of these.

Late or missed payments on your credit report will fade over time, but if you want to get a mortgage or remortgage you should try and avoid these altogether. It’s always worth taking steps to improve your credit score if you can. Check out our guide on improving your credit rating.

Can I get a mortgage with late or missed mortgage payments?

If you’ve been late paying your mortgage in the past, or even missed payments altogether then you may find it more difficult to get a new mortgage. But it all depends on how long ago it was. 

If you’ve recently been late with your payments and are currently ‘in arrears’, then your credit score and probability of being approved will be lower too. However if your late or missed payments were in the past, then you stand a far better chance. 

Late or missed payments could also affect the amount you’re able to borrow. Lenders may see you as higher risk so 95% to 90% loan to value mortgages may be out of reach until you can show a clean credit report for at least 12 to 24 months.

To increase your chances of being approved you could save for a higher deposit or consider accepting a higher interest rate. But it’s always best to discuss this with a specialist broker.

For more information on how late mortgage payments can affect mortgage applications take a look at our Guide

Remortgaging after late or missed mortgage payments

Remortgaging works pretty much the same as getting a mortgage for the first time. If you’re looking to  remortgage, then the older your missed payment, the less severe it will seem to lenders.f you’ve missed a payment in the last 12 months it can be more tricky to get approved as you’ll be considered a high risk of missing one again.

Whatever your situation, using a specialist broker who has access to the whole market could increase your chances of being approved and save you a lot of hassle. Make an enquiry to get matched to the perfect mortgage broker for your unique circumstances.

Tips to avoid late or missed mortgage payments

Here are some tips to help you stay on track and avoid any fees or charges due to late payments:

  • Set up a monthly standing order (automatic payment) with your bank or your lender – This can usually be done online or over the phone to save time. But make sure you have enough available funds in your account each month to avoid any issues.

  • Get the app – lots of lenders now have their own phone apps to help you track and pay for your mortgage more easily.

  • Set up calendar alerts or reminders on your phone – if you tend to forget things then these notifications to pay your mortgage can be a lifesaver.

  • Ask for help - whether it's from your lender or a specialist broker that understands your situation. There are normally lots of options available to you if you’re struggling to pay your mortgage.

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