Your mortgage is probably your household’s most significant debt and accounts for most of your living expenses. Understandably, money has been tight for many Americans in this COVID economy, and many homeowners were late on their payments. If this sounds like you, you may be wondering what the short and long term consequences are when you pay your mortgage late.

Your mortgage officially becomes delinquent as soon as the payment is received late --meaning past the grace period. While lenders expect payment on the first, they typically allow for a grace period of about 10-15 days before it's considered delinquent and charge you a late fee. The amount they charge as a late fee varies but is typically a percentage of the original payment amount. If your mortgage payment reaches 30 days delinquency, your lender will report this to the credit bureaus.

If your credit score is 720 or higher, expect to lose about 100 points after one 30-day late payment. If your credit is closer to 680, it'll lose about 60 to 80 points after one missed mortgage payment. After your payment is late by 60, 90, 120, or more, your score will continue to drop, although it'll be by a lesser amount than the initial 30-day late payment.

It'll take about 9 months for a borrower with a 680 score to recover while a 720+ credit score borrower can expect 2.5+ years for their score to improve to their original level.

Some lenders "charge off" your account if your delinquency continues, meaning that they no longer consider your mortgage as an asset. In this case, they will collect your mortgage payment via collections. Note that it takes longer to recover from a charge-off than a regular delinquent payment.

Compared to a charge -off, the occasional 30-day or 60-day late payment will hurt your scores minimally and temporarily. A charge-off can stay on your credit report for seven years.

Making sure that the rest of your debts are paid on time is the shortest path to recovery. Also, work on bringing your mortgage current as quickly as possible and ask your current lender about forbearance or a loan modification.

In addition to trying to recover quickly, you also want to avoid actions that impact your credit the worst. That would be filing for bankruptcy after your mortgage delinquency, foreclosing, a short sale or a deed-in-lieu of foreclosure, as those actions remain on your report for 7 to 10 years.

Did you know that you may be able to avoid all of these by refinancing your current loan into a new lower rate? By lowering your current terms, you can reduce your monthly payment into one that is more manageable. Contact us today to learn about your options.