A mortgage is like a deal between you and the bank. You get money to buy a house, and in return, you promise to pay the bank back with interest over time. But if you miss payments, things can get serious, and you might lose your home.
What happens if you miss a mortgage payment?
If you miss just one payment, the bank will probably get in touch with you but it’s unlikely your home will be foreclosed upon immediately. But don't ignore them. They might send you a letter warning you about what could happen next.
Even if they don't start the process right away, ignoring the warning could still cause trouble. They might file something called a "lis pendens," which is like a heads-up to everyone that there could be legal trouble with your property. This could mess up your plans if you want to borrow more money or get a credit card. And if you try to sell your house, it'll show up in the paperwork.
Late payments can have consequences, but they're often not severe at first. Lots of banks give you a little extra time called a grace period, usually about 15 days after the due date, to make your payment without extra fees. However, once you're officially late, you might have to pay a late fee, usually a percentage of your mortgage payment.
If you think you'll miss a payment, talk to your bank right away. They might be able to help you out with a temporary break from payments or change your loan terms to make them more manageable. They might even waive the late fee if you usually pay on time. But don't count on them forgiving the interest you owe.
How many payments can you miss before losing your home?
Normally, if you miss four payments in a row (that's about 120 days), the bank might start foreclosure proceedings. But it can vary depending on where you live, who your lender is, and other factors.
Foreclosure isn't a quick process. It can take a while, and there are usually steps along the way where you can still fix things.
The foreclosure timeline: The foreclosure process typically has five stages, but you can often halt it at any point by working with your lender to pay off what you owe before your home is taken away.
Missed Payment: You miss a payment and maybe get a warning letter from the bank.
Notice of Default: After a few months of missed payments, the bank officially starts the foreclosure process by sending you a notice. This could hurt your credit score.
Preforeclosure: If you pay what you owe, plus extra fees, during this stage, you might be able to stop the foreclosure.
Notice of Sale: The bank schedules an auction to sell your house.
Eviction: If your house gets sold, you'll have to move out.
How missed payments affect your credit score?
If you miss a payment, the bank can tell the credit agencies, which can lower your credit score. How much it goes down depends on how good your score is to start with.
But if you're just a few days late, it usually won't show up on your credit report. It has to be at least 30 days overdue before it's considered "late" by the credit agencies.
In conclusion, it's best to pay your mortgage on time to avoid extra fees or losing your home. If you think you'll miss a payment, talk to your bank as soon as possible to see if they can help.
