Last updated: 23/07/2020 | Estimated Reading Time: 4 minutes
What happens if I miss my mortgage payments?
Missing your mortgage payments may seem disastrous, but if you take the right action it need not be the end of the world. Mortgage lenders have an interest in your continued payments, so will usually work with you. Failure to pay your mortgage bill will have negative consequences, but these can often be minimised by communicating with your lender. This guide will take you through what missing a mortgage payment means, and how to minimise the consequences of missing your mortgage payments.
In This Guide:
- What are the consequences of missed mortgage payments?
- What should I do if I can’t make my mortgage payments?
- Where can I get help for missed mortgage payments?
What are the consequences of missed mortgage payments?
Falling a single month behind on your mortgage payments doesn’t mean the end of the world. Whilst there will be some negative consequences, these can usually be minimised, or even avoided by communicating with your lender. However, it’s important to be aware of what may happen if you miss your mortgage payments.
Generally, failure to pay your mortgage will be reported by your lender to the major credit bureaus and they will lower your credit score. After your grace period (this is usually one week to fifteen days after the payment due date) a late fee will be added onto the payment you failed to make. If you fail to pay this late fee along with your next payment, even if you are up to date on all your other payments, your mortgage will not be considered current.
Falling behind on mortgage payments by 90 days will usually mean you have defaulted on the loan, meaning your lender can begin repossession actions. This can lead to eviction, so it’s essential that you communicate with your lender to minimise the likelihood of this happening. Speaking to your lender may enable you to make a plan for the payments you owe, or you may even be able to create a forbearance agreement with your lender (a short term solution to catch up on your payments).
Court action and repossession is a last resort, so you should have the opportunity to negotiate repayment agreements and seek financial advice before this happens. It is in the lender’s interests for you to continue payments, so they will likely help you find solutions. Make sure you tell your lender as soon as possible if you foresee any struggles with mortgage repayments and they will help you make the situation as manageable as possible!
What should I do if I can’t make my mortgage payments?
If you are worried about making mortgage payments you should always contact your lender. It is in their interests to help you make your payments each month. Your lender will be able to talk you through alternative that will help you make your payments whilst you address any financial problems.
You may be able to make temporary payment arrangements, lengthen the term of your mortgage, or you may be able to temporarily switch to interest-only repayments. You may even be able to take a mortgage holiday which might give you the time to address your financial difficulties.
It is best to get ahead of the problem, so speak to your lender as soon as you think you might have difficulties repaying. Some lenders may be willing to offer informal forgiveness, or hold off on late fees or reporting to credit agencies if you let them know before you fail to make a payment. You may even qualify for a forbearance program. This could allow you to miss a payment, or make lower payments for a period of time while you deal with any financial problems.
If your inability to pay your mortgage is temporary, your lender will likely work with you to get your loan current within a few months. If your financial issues are more permanent, they may refer you to their loss mitigation department. This could mean modifying your loan, or may mean downsizing or selling. It may seem daunting, but it is preferable to defaulting on your mortgage and risking repossession. It is always essential to speak to your lender to work out the for you.
Where can I get help for missed mortgage payments?
There is help available if you are worried about missing mortgage payments. Before getting a mortgage you may want to consider taking out Mortgage Payment Protection Insurance (MPPI). This is a type of income protection that can cover your mortgage payments in case of accident, sickness, and/or unemployment. Many plans can pay your mortgage for up to 12 months, or until you return to work but it’s possible to take out longer policies. It’s really worth considering MPPI while you are comparing .
There are also national and local programs which can help with your mortgage payments. Support for Mortgage Interest (SMI) is a government loan which covers your mortgage interest.
The government offers some programs which could help lower your monthly mortgage payments, or offer options if you are concerned home ownership is no longer a viable option. These schemes can be helpful if you are worried about making your mortgage payments, however your first action should always be to contact your lender.
If you are financially aware and act quickly you shouldn’t have to worry about missing mortgage payments. Be aware of the help available and prioritise your mortgage payments to prevent any negative consequences.