Late On a Mortgage Payment: How to Get Back on Track

Missing a monthly payment is one of the most important mortgage mistakes to avoid. If you've recently acquired one or two late payments, there are many things you can do to get back on track with your mortgage lender. You can get back on track after a missed payment by identifying the cause, working with your lender, and establishing a new budget. Keep reading to learn how to draft your personal repayment plan.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

Identify Why You're Not Able to Make Your Payments

Before a homeowner can start to get back on track with their bank, it's essential for them to understand why they're having a hard time making a payment. Sometimes the reason is apparent, like the loss of a job or death in the family. Other times, the reason is not very clear.

Sometimes problems happen gradually when a homeowner overutilizes credit, has too many late payments on other debts, or has failed to budget for their complete living expenses. Auditing your financial history can be a vulnerable experience, but getting through it will help you hone in on the root cause.

Work With Your Lender

Many lenders have different tools to help homeowners unable to make their mortgage payments. It's important to remember that lenders do not want homeowners to default on their payments because if they do, the lender must take over the property and try to sell it to someone else. This costs the lender money, and the process is never easy. Below are some options that lenders may offer to homeowners in trouble.

Skip-A-Payment Option

Some lenders offer a one-time skip-a-payment option for people who cannot make their mortgage payments. This one-time-only option allows the homeowner to skip an installment. Although they may have to pay fees, the fault won't appear on their payment history. The homeowner must also pay interest on the loan. The interest is added to the balance, which causes the overall total amount due to grow.

Rolling Late

Homeowners who skip a single payment and aren't offered the skip-a-payment option by their lender may find themselves in a "rolling late" cycle. The late rolling cycle occurs when the homeowner skips a payment in month A, then pays their mortgage on time in month B.

However, because they skipped month A's payment, the homeowner is still considered late because the payment made in month B was applied to month A. Until the homeowner makes up their payment, the payment made in subsequent months will always be considered "late." This can have an impact on the homeowner's credit score and can also be a challenging cycle to break.

Rework Your Budget

Creating a budget is one of the most important steps in getting back on track after missing a mortgage payment. Having a budget gives you an organized plan to pay your past-due bills and catch up with your future payments. A good place to start can be by checking your income, then writing down all fixed costs, such as rent or insurance. From there, break down other categories like food and entertainment and assign reasonable limits to them.

You'll know you're on track for success if your income exceeds your expenses. If it's not, you may be at risk for missing another payment. You can improve your debt-to-income ratio either through higher-paying jobs, side hustles, or by finding expense categories that can be reduced. With these components working together, it becomes easier to manage the responsibilities of making payments and keeping them up-to-date in the future.

Increase Your Income By Renting Out Your Home

Sometimes homeowners can relieve their financial situation by turning a portion of their home into a rental property. Renting out extra space above the garage or in a basement apartment can help homeowners supplement their income without moving. By reducing the amount you personally owe each month, you can contribute more to savings and get caught up with each subsequent payment.

A word of warning: make sure not to increase your expenses as your income increases. It's tempting to spend extra rental income, but anyone behind on mortgage payments would be well-advised to put that money towards an emergency savings fund to avoid missed mortgage payments in the future.

Consider Selling Before It's Too Late

Sometimes when a home becomes too expensive, it's up to the homeowner to make a change. Just admitting this time has arrived can be very difficult for many homeowners. Putting your home up for a short sale can prevent it from going into foreclosure.

While it's never a pleasant decision, it's often easier to sell the home in the early stages of financial trouble rather than in the later stages. In the later stages of financial trouble, a homeowner may let maintenance fall behind, and the home may become less desirable to buyers. In addition, many homeowners who fall behind on one payment will soon find themselves falling behind on another and another, which adds to the stress of trying to maintain a home.

Foreclosure

A homeowner who misses repeated mortgage payments and cannot pay it back to their lender may face foreclosure on their home. The foreclosure process happens when a homeowner misses too many payments, and the bank reclaims the property.

Foreclosure proceedings can be long and time-consuming, and in that time, the homeowner will have many opportunities to pay back their mortgage to get current with their lender. However, doing this becomes more difficult as administrative fees pile on.

Don't Let A Missed Payment Add Up

If you're a homeowner who is current with your payments but you're concerned that you could fall behind sometime soon, contact your lender. Your lender may be able to refinance your loan or work with you in some other way to ensure that you can stay current with your loan. Once you've fallen behind, it can be tough to get out of a hole. If you've already missed one payment, work with your lender to find a way to resolve your situation. Your lender may be able to suggest options that could help you get back on track.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.