Some people do not realize how late payments work on their mortgage. Your mortgage is legally due on the 1st of each month except on a home equity line, which may be due at almost any time of the month. I am focused in this blog post more on regular mortgages.
There is a grace period?
It is customary for banks to offer a 15 day grace period, so you can pay your mortgage up until the 15th of the month without being assessed a late fee.
The late fee
Any mortgage payment made between the 16th and the last day of the month will be considered late by the lender, and will be assessed a late fee (usually 5% of the payment).
When is it reported late to the credit bureau?
However, the lender does not typically report you as being late on your mortgage until you are over 30 days late. You could technically pay your mortgage on the 20th of each month, and be late enough that the lender charges a late fee each time, but may still have a spotless record on your credit report. But that gets expensive as the late fees add up.
When should I pay?
And that is not meant to encourage people to pay late all the time as long as its not 30 days late. In fact, I’d encourage people to pay as close as possible to the 1st of each month. And I encourage that people set up an automatic withdrawal from their checking account. There is no sense risking a late fee. And, why some people regularly pay late is beyond me. Someone that pays each month around the 15th is still paying in 30 day cycles so why not move the cycle up to the 1st of each month!
Think about it, the people that feel constantly behind on their mortgage and always pay around the 13th, 15th, 18th of the month, and flirt with a late fee each month, are paying in the same 30 day cycles as the person who pays on the 1st of each month.
Conclusion
Sometimes I think late payments end up being more about sloppy bookkeeping or budgeting than inability to pay. So, set up an automatic withdrawal, and realize that 12 payments a year are 12 payments a year no matter when you pay them, so pay close to the 1st of the month.
Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.
