Missing a mortgage payment is a serious matter.
To help you understand what happens you need to know the financial implications involved. This includes whether you may be involved in potential late fees, as well as there being an impact on your credit score
From potential late fees to the impact on your credit score, missing a mortgage payment is a serious matter that requires immediate action.
Knowing you have missed mortgage payment can be a worrying experience, so it’s essential to be informed and to understand the implications so that you can take the necessary steps to handle the situation.
Consequences of Missing a Mortgage Payment
Missing a mortgage payment can trigger several things happening and so it’s important to be aware of these consequences.
Firstly, your lender may charge you a late fee. These fees vary but can significantly increase the cost of your loan if they accumulate.
In addition, your lender is likely to report the missed payment to the credit bureaus after 30 days. This can lower your credit score.
A reduced credit score can make it more challenging to borrow in the future.
So, worse case scenario, if you continue to miss payments, the lender can begin foreclosure proceedings to take possession of your property. So addressing a missed payment quickly is super important to avoid such outcomes.
Unintended Consequences
If mortgage payments continue to be missed, there can be serious legal repercussions, as an unintended consequence.
The loan agreement you signed with your lender is legally binding so failure to comply with the agreed terms can lead to default which means that the lender then has the right to issue a Property Law Act notice, which is a formal demand for payment.
If the overdue amount is not paid within the stipulated time, (usually 20 working days), the lender can begin the process to sell the property through what is called ‘mortgagee sale’.
This can result in the loss of your home and any equity you have built up over time. Furthermore, being subject to a ‘mortgagee sale’ can make it more difficult to borrow in the future.
What You Need To Do When You Miss a Payment, or are about to
Contact Your Lender As Soon As Possible!
If you’ve missed a mortgage payment, or are about to, always contact your lender as soon as possible. Explain your situation and the reason for the missed payment.
Your lender will very likely be willing to work with you to find a solution, such as a revised payment plan. Proactive communication is key
Also remember that lenders prefer to avoid foreclosure / ‘mortgagee sales’ wherever possible, as it’s costly and time-consuming for them.
By reaching out early, you show that you’re committed to resolving the issue.
Make sure to keep records of all correspondence with your lender, including dates and the names of any bank representatives you have either written to or spoken with.
This information can be valuable if there are any disputes going forward.
Explore Alternative Repayment Options
After contacting your lender, you should explore alternative repayment options that they may offer.
Some lenders offer a grace period, allowing you a little extra time to make your payment without penalty.
Others might suggest a repayment plan that spreads the missed payment across future instalments, temporarily reducing your monthly payment amount.
In certain circumstances, restructuring your loan could be an option, which involves changing the terms of your loan to make payments more manageable.
It’s important to understand the long-term implications of these alternatives, as you can end up paying more in the long run, but if it gives you the breathing space you need, then it may be a very viable option.
Don’t forget to read the small print and ask questions to ensure you fully grasp how these changes affect you and your mortgage. Choosing the right option can provide the relief needed to get back on track without further harming your financial standing.
Professional Financial Advice Is Important
When facing financial difficulty, such as a missed mortgage payment, it pays to seek professional advice.
Financial Advisers or credit counselling services can offer valuable insights into managing your situation more effectively.
They can help you assess your overall financial situation, helping to identify areas where you can perhaps cut costs and develop a budget that accommodates your mortgage obligations.
Your focus should be to address the immediate issue of the missed payment and to establish a solid financial footing to prevent future occurrences. Professional advice can be instrumental in achieving both objectives.
Have a Contingency Plan
Creating a contingency plan is essential for preventing future missed mortgage payments. This plan should include building an emergency fund that can cover your mortgage for several months in case of unforeseen circumstances such as illness, or job loss.
This can be done by setting aside a small amount each month as your budget allows.
Such a contingency plan means you have a safety net that gives you peace of mind and keeps you prepared for any financial hiccups that may come your way.
Importance of Regular Reviews
Your financial situation may change during the life of your mortgage, so you need to regularly review it.
An annual review is ideal. Then you can examine your income, expenses, debts, and investments to ensure you’re on track with your financial goals. A regular review allows you to adjust your budget, identify potential problems before they escalate, and ensure you are saving enough for your emergency fund.
Working with your Mortgage Adviser here at iLender to regularly review your mortgage, is a proactive measure that can help prevent any future financial strain.
Being well-informed about your mortgage helps you make timely decisions that will safeguard your financial wellbeing.
So, feel free to reach out if you need a hand, or just to have a chat about this, pick up the phone and call 0800 LENDER (536337) or email to [email protected]
