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You should pay your mortgage on the first of the month, but mortgage grace periods typically let you pay by the 15th without being penalized.
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It goes without saying that always making your loan payments on time is arguably the most important rule for you to follow in order to earn and then maintain great credit scores. Late payments should be avoided like the plague. However, the subject of late payments and credit reporting, especially mortgage late payments, is often misunderstood.
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When it comes to home loans, the industry standard is that the payment due date is usually on the 1st of the month. In practice, however, mortgage payments aren’t considered past due until after the 15th of the month.
It is believed that mortgage lenders build in the standard 15-day, penalty-free grace period in order to make accommodations for the different payday schedules of their customers. It may also be possible that there are some states that prevent lenders from charging a late fee during the grace period.
Mortgages are the only loan type where the due date is really “any date between the 1st and the 15th of the month.” In fact, the majority of mortgage companies do not assess a late fee until a monthly payment is more than 15 days past due.
Some consumers do report receiving “collection” calls from their mortgage companies if the payment is not received by the 1st of the month, so it is best to make your payment by the 1st if you wish to avoid those calls.
Note: Grace periods can vary from lender to lender. You should always check with your mortgage lender to verify your exact grace period before making the assumption that it is the 15-day industry standard.
If you pay your mortgage 1 day late, or 16 days late for that matter, it will not result in your mortgage company reporting a late payment on your credit reports. You actually have a full 30 days after your payment due date before a lender is allowed to officially report a late payment to the credit bureaus (Equifax, Experian, and TransUnion).
If you actually pay your mortgage payment late enough for it to show up on your credit report as 30 days delinquent, then you could be in store for some severe credit score damage. A popular credit myth is that if you miss just one payment, it really won’t hurt your credit scores.
In reality the “one late payment won’t hurt me” myth is actually one of the most harmful and dangerous credit score myths for a consumer to believe. The truth is that even a single missed mortgage payment puts you in serious jeopardy of experiencing a credit score drop – possibly a significant one.
Consistently paying your monthly mortgage payment deep into your 15 day grace period is very dangerous habit to form. Instead, it is best to treat your grace period more like a “get out of jail free card.” If possible, construct your budget so that you plan to pay your mortgage on the 1st of each month. Then, if an emergency arises, you can take advantage of your mortgage payment grace period if needed.
Some financial institutions allow forbearance — the temporary suspension of mortgage payments — and some don’t. Many that do will only allow it in certain situations. Contact your loan servicer to learn more about available relief options.
If you’re planning to request mortgage forbearance, be sure to have a good reason, and try to prepare evidence of financial hardship.
Plus, keep in mind that forbearance should be treated as a short-term solution. You’re still responsible for your remaining mortgage balance, and every payment you skip will have to be paid once you’re in a position to do so. If you’re considering forbearance because you’re struggling to pay debts, try to get your financial act together by the time you begin paying again (our tips for a debt-free life are a great place to start).
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John Ulzheimer is a recognized expert on credit reporting, credit scoring and identity theft. He is a credit blogger for Credit Card Insider, CreditSesame, Mint, and the National Foundation for Credit Counseling. John is twice Fair Credit Reporting Act (FCRA) certified by the credit reporting industry’s trade association and has been an expert witness in over 140 cases involving credit issues. Formerly of FICO and Equifax, John is the only recognized credit expert who actually comes from the credit industry.
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