The number one rule when you have a mortgage is to never be late with even one payment. Having a late mortgage payment or missed payment can set off a process with your lender that is liable to end very negatively. As much as you possibly can you want to avoid late mortgage payments.
But of course, that presumes that life doesn’t get in the way. We all know that things happen that can affect a homeowner’s ability to make mortgage payments on time. You’re doing great and then, all of a sudden, your financial situation shifts or your lifestyle changes abruptly, and now you’re dealing with late mortgage payments fees, negative effects on your credit report, and the threat of foreclosure. It can happen fast so it’s important to understand what you can do if you think you’re going to be late on a mortgage payment or if you’ve already missed one. Let’s take a closer look at what happens when you miss a mortgage payment, if the mortgage payment is late then forgiveness is possible, and how to avoid late mortgage payments in Louisville.
Avoiding Late Mortgage Payments In Kentucky
Late Mortgage Payment
When a homeowner buys a house and takes out a loan from a lender or back, here in Louisville or elsewhere, they are agreeing to a mortgage. The basics of a mortgage are that you are agreeing to repay the loan to the lender, using the property you’ve purchased as collateral against the loan. You agree to pay back the loan, with interest, over a specific period of time that is broken down into monthly payment periods.
Unless you come to a unique arrangement with your lender, mortgage payments are usually due on the first of the month, just like with a rent payment. If you are late paying your mortgage, what happens next depends on a few factors, including your lender, any leniency they have with your mortgage, how often you’ve been late in the past, and the current economic conditions.
Chances are if you are late on your mortgage payment by a few days, you likely won’t have to pay a late fee. There are often contingencies built into mortgage payment plans that allow for a short grace period. You also likely won’t have to worry about the tardiness being reported to a credit bureau just yet. It’s a good idea to read the fine print or contact your lender to find out what their policies are for grace periods before instituting late fees as that can be helpful for your peace of mind. It’s not entirely uncommon for a mortgage lender to build in a grace period of as long as 15 days.
Of course, that doesn’t mean you want to get in the habit of testing your mortgage company’s graced period limits when you don’t have to. They’re likely to still make a note internally that your payments are being received after the due date and could hold that against you if you decide to refinance or ask for forgiveness down the road. You also don’t want to risk running low on funds just before the grace period ends, leaving yourself with little recourse against fees.
If you don’t make your payment by the time the grace period ends, you are likely to incur a late fee, which is often around five percent of your monthly payment. Maybe that doesn’t sound like much but if you’re having trouble making your monthly payment already, adding any amount isn’t going to make your life easier.
Once you cross the 30 day period without making a mortgage payment, you’re moving into a period that will have greater consequences beyond a late fee. This is likely when the lender will report your missed monthly payment to credit bureaus and that’s going to have a big impact on your ability to get loans and other lines of credit in the future. Your credit score will likely go down, and while it’s hard to predict how much it will drop, it’s never a helpful thing for you.
Even though you’re 30 days late at this point, you’re unlikely to go into foreclosure just yet, though it’s not unheard of, especially if you have a history of missing payments. Your lender will likely be in touch at this point and will try to work with you to avoid foreclosure since they’d like to get their money’s worth. However, they could place you in pre-forclosure, with the understanding that if you have not made your payment within 60 or 90 days, they will place your Louisville house in foreclosure and you might lose it.
What Is Late Mortgage Payment Fee?
If you are late on your mortgage payments, that opens the door for your lender to charge you late mortgage payment fees. But not all fees are the same and there are unique circumstances that can mean different fees that affect your credit score or credit report in different ways.
As mentioned, if you are late on your mortgage payment, you will eventually be charged a late fee as soon as the grace period is over. Each lender or bank has its own timeline for determining when that period ends and late fees will be assessed. It will be noted in the loan documents you signed when that period ends and when late fees are accrued. As noted, this is likely to be around for or five percent of the overall monthly payment amount. Check the Kentucky state laws to see if they limit the amount a lender can charge on late fees to make sure they’re in compliance. State law will almost always override loan documents.
Something else you’ll need to be aware of is the possibility of a property inspection fee. The lender has a vested interest in the property they’ve lent you the money on, so a property inspection is their way to confirm that it’s being treated in the manner expected as part of the loan. This usually happens once the loan moves into default and the charge for any inspection varies but is usually low. Still, if there are ongoing concerns this can turn into a monthly fee and that can add up quickly, especially if you’re not paying on time and accruing other fees.
If your property does go into foreclosure, there are fees and costs involved with that as well. There may be attorney’s fees or trustee’s fees, depending on the type of foreclosure and how the process is handled. Given that a foreclosure hands over ownership of the property from you to the lender, there are likely to also be title costs, filing fees, service of process fees, mailing costs, sheriff’s fees, and, publishing and posting costs.
Take Advantage of Late Mortgage Payment Forgiveness
Chances are, your lender will want to work with you to avoid foreclosure on your Louisville house because they’d much rather you keep repaying the loan than they take back ownership of the property. They might even let you skip a payment or move it to the end of the loan in order to provide some breathing room. They might also offer some kind of repayment plan that divvies up the missed payment across the loan in order to give you the time you need.
You can also contact your lender about a forbearance. If you are dealing with a temporary hardship like a lost job or a huge lifestyle change, your lender might press pause on payments for as much as 90 days. You will still have to make those payments, which get tacked on to the end of the loan, but at least this allows you to get some breathing room.
You can potentially apply for a loan modification as many programs exist to reduce your interest rate or extend the term of your loan, which drops the amount due each month. It is even possible to qualify for a principal amount reduction. You already need to be late on your loan in order to qualify for these programs and they depend on the specific state and other conditions, but it’s worth looking into.
Other Late Mortgage Payment Options
If you find yourself dealing with late mortgage payments and your lender isn’t willing to budge on deferments or modifications, you do have some other options. Ask your financial advisor about any mortgage relief that exists, such as the aforementioned loan modification programs. There are also organizations and government programs to help with late mortgage payment relief.
If you feel as though you’re falling underwater and you won’t be able to continue making loan payments in a timely manner, you can avoid future late fees and extricate yourself from the lender by selling your Louisville house as-is to a cash buyer like Time Worthy Property Solutions. We buy houses with late mortgage payments and we buy homes facing foreclosure in Louisville. We understand the pressure you may be under and want to help relieve that financial strain.
Just contact us today and we’ll reach out to get as much information as we need to make you a no-obligation offer. If you like the offer, we can close in a matter of days so you don’t have to worry about any more late fees. No need to make repairs or clean up, we buy your house as-is. And then no need to deal with mortgage lenders or late fees from now on.