How are mortgage payments applied if you miss a payment and then start making your payments again?
If you missed a mortgage payment for whatever reason you may be surprised to learn that your lender may not accept the next monthly payment you make. With most mortgages, borrowers are required to bring their loan current by paying any past due interest, late fees and penalties before the lender accepts any regular monthly payments.
For example, let’s review a scenario for a borrower with a $2,500 monthly mortgage payment who is required to pay a $150 penalty for a missed payment. If the borrower misses their mortgage payment one month and sends in the regular $2,500 payment the following month, the lender may not accept the payment because the account is not current.
In this example, the borrower would have to make a payment of $2,650 to address the missed payment and the penalty before the lender accepts any additional monthly payments. So the total amount due the month after the missed payment would be $5,150 -- the payment for the current month plus the missed payment and penalty.
In most cases, mortgage past due interest, late fees and penalties increase over time so the longer you wait before you bring your account current, the higher the cost. Additionally, in a worst case scenario, failing to bring your mortgage current within a specified time period triggers a default and eventually the lender may be able to foreclose on the property.
This is why if you do miss a mortgage payment it is highly beneficial -- and can save you a lot of money and hassle -- if you correct the issue as soon as possible.
We recommend that you review your mortgage note to understand how missed payments are handled, including any late fees you incur and what you are required to do to cure any delinquencies. We also advise you to contact your lender to confirm your interpretation of the note as well as the best way to bring your account current.
If you missed your payment for the first time, the lender may waive the penalty or late fee if you address the issue immediately. For more complicated situations you may be able to structure a "work-out" or payment plan with you lender to bring the account current over a period of time, although not all lenders offer this approach.
Understanding the terms of your mortgage note and communicating with your lender are the first steps to take after missing a mortgage payment. Having the right plan in place should enable you to bring your loan current and make sure that your monthly mortgage payments are accepted by your lender in the future.
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