Are Late Mortgage Payments Ever Okay?
Question: We have paid our mortgage several days after the due date but before the lender charges a late fee. Does this lower our credit score?
Answer: You need to look at this very carefully. A mortgage is a contract. It has certain terms and conditions. You want to honor all conditions.
In the usual case and with virtually all lenders mortgage payments are due on a certain day each month. Payments made after the due date are, literally, late. The question then becomes: What are the consequences of being late?
Most mortgage agreements today provide a grace period after the due date. There is no late fee for payments received during the grace period — but the payment is, again, literally late.
The reason for grace periods is that payments can be delayed in the mails, due dates fall on holidays, a payment may not be immediately processed, etc. Rather than debate when a payment was mailed or how it was processed, lenders allow a grace period.
The consequences of a payment received during the grace period are, usually, zero. There is no late fee and nothing shows up on your credit record. (Payments less than 30 days late, even if they result in a late fee, typically are not reported to credit bureaus or listed on credit reports, thus they will not impact credit scores.)
Why do I say usually? Because not all loan agreements have grace periods. A mortgage agreement read literally could allow a late payment to result in the loan being called. And not all mortgage contracts are fair — think of predatory loans where interest rates can rise or step fees can be imposed when payments are late. For these and other reasons, borrowers should make a point of always paying mortgages on or before due dates.
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Syndicated originally by Content That Works and posted with permission.
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