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What Happens When You Miss a Mortgage Payment?

Sean Cooper

Nov 29, 2022 9 min read

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Monthly mortgage payments

Have you recently missed your monthly mortgage payment and are wondering what happens? You’ll be glad to know that you typically have a 15-day grace period to make your mortgage payment without consequence. If you fail to make your mortgage payment in that timeframe and it gets to over 30 days late, that’s when there might be some consequences. Let's take a look.

Your Credit Score Drops

You typically have 30 days after the due date to make your mortgage payment. If you haven’t made it by then, your lender will typically report it as a missed mortgage payment to the credit bureaus. A missed mortgage payment will almost certainly cause your credit score to drop.

Payment history is the most important factor when it comes to your credit score. When you are late on your mortgage payments, it can really drag your credit score down. The later your payment is, the bigger the impact on your score.

A one-off late payment may be okay if it was an honest mistake. However, if you have several missed mortgage payments, it can make it difficult to obtain mortgage financing with a prime lender in the future. Late payments typically stay on your credit report for a maximum of seven years. That means you may need to obtain mortgage financing at a higher rate and pay additional fees until then.

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Need to Pay Late Fees

Not only will a late payment count as a blemish on your credit report, but you’ll also almost certainly need to pay late fees. The mortgage contract you signed when you first took out your mortgage will outline them. Usually, there is a non-sufficient funds (NSF) fee with both your lender and bank where you have your chequing account. The fee is usually about $75. That means missing one mortgage payment could cost you $150 in fees.

If it was an honest mistake, you can try calling your lender and bank to get the fees reversed. However, if it happens more than once, you’ll likely have to bite the bullet and pay those fees yourself.

Your Mortgage May Go into Default

If you fail to make your mortgage payment 30 days after it’s due, that’s when your mortgage is considered in default. Being in default is when you fail to uphold your end of the mortgage contract. Most commonly this is when you miss mortgage payments.

Being in default isn’t a situation to take lightly. It can negatively affect your credit score for years to come and, in the worst-case scenario, can lead to you eventually losing your house.

You May Face Foreclosure

In certain provinces, including British Columbia, Alberta, Saskatchewan, Manitoba, Quebec and Nova Scotia, a lender must use a foreclosure to repossess the property. It’s called judicial sale or judicial foreclosure in these provinces.

Foreclosures can be quite time-consuming and costly for your lender, since it has to go through the courts. In fact, it can take up to six months to process. Once the foreclosure happens, the title of your property is transferred to your lender. When your lender sells your property, it gets to keep all the proceeds of sale, even if there are additional funds left over after the mortgage and all fees have been paid, making it very costly for the homeowner.

Missed payments

Power Of Sale

In certain provinces, including Ontario, Newfoundland, New Brunswick and Prince Edward Island, lenders use something called power of sale, rather than foreclosure, to repossess the property and recover the money that is owing to them.

Once a payment is at least three months late and there has been no alternative arrangements made with the lender, your lender will typically send you a notice asking you to make payment, giving you another 35 days to do so. If you make the payment in this timeframe, the power of sale process should stop, although you’ll still be responsible for late fees and your credit score will still be negatively affected.

If you fail to make the payments due in 35 days, that’s when your lender will typically start the legal process of transferring the ownership of the property to them using a power of sale. Since the power of sale doesn’t go through the courts, it typically happens a lot faster than a foreclosure.

What Can I Do If I Miss a Mortgage Payment?

If you’re about to miss a mortgage payment or you’ve missed a mortgage payment, here are a couple things you can do to mitigate the situation.

Contact Your Lender

If you believe you’re about to miss a mortgage payment, you’ve exhausted all options and you can’t make it, it’s far better to be proactive and reach out to your lender and let them know in advance. By being proactive, your lender will almost certainly appreciate it and will most likely be more willing to make a special arrangement for you. This lessens the impact of the missed mortgage payment and puts you in a stronger negotiating position with your lender. It’s a lot better than the lender calling you after one or several missed mortgage payments and demanding repayment.

If you used a mortgage broker, it doesn’t hurt to reach out to them. Your broker can sit down and help figure out alternative arrangements for you.

Mortgage lenders

Make a Payment within Your Grace Period

You may be familiar with the term “grace period” from your credit card or student loan. A grace period is period of time you can go without making a payment without consequence.

In Canada, most lenders provide you with a grace period of 15 days before your mortgage payment is counted as late. If you can make your payment within that 15-day period, you most likely won’t accrue any late fees or penalties, and your credit score will probably be unaffected.

How Many Mortgage Payments Can I Miss?

While there is no set number of mortgage payments someone is allowed to miss, you can typically be late on a payment for three months before your lender will start the foreclosure or power of sale process. Before this, your lender should give you the opportunity to make alternative arrangements, such as extending your mortgage’s amortization period to make the payments more affordable, or coming up with a repayment plan. If you haven’t reached out to your lender, your lender will typically phone you and send you letters once you start being late on your payments.

What is a Rolling Late?

Before understanding the term “rolling late,” it’s important to know the difference between skipping a mortgage payment and missing one. If you miss a mortgage payment in a single month but start paying your mortgage as usual the following month, you’re not actually back on track with your regularly scheduled mortgage payments. When you make the following payment, it actually counts as a late payment of the one that you missed.

To bring your mortgage payments up to date, you’ll need to double up your mortgage payments until you’re caught up. Until you do that, every payment that you make after the first missed one will count as late. This is what it means to be in a “rolling late” situation. When this happens, you’ll likely be charged late fees and interest for each month, and it could lead to a significant drop in your credit score.

Interest rates

Can You Recover from a Late Mortgage Payment?

Yes, you can almost certainly recover from a late mortgage payment. Lenders typically wait at least three months before foreclosing or doing a power or sale on your property. Even once the foreclosure or power of sale process has started, a homeowner can still halt it by paying what is owed to their lender.

How Many Mortgage Payments Can I Miss Before Foreclosure?

A foreclosure typically happens when you, the homeowner, are no longer able or willing to make your agreed upon mortgage payments. When a mortgage lender initiates foreclosure proceedings, the lender seizes the property, removing you from the title as the homeowner, selling the property and recovering the funds owed to them, as specified under the mortgage contract.

Foreclosures can be a costly and drawn out process, so lenders want to avoid them at all costs. Your lender would much rather have you make your mortgage payments than have to foreclose on your property.

At the point where you are one month, two months and three months late on your mortgage payments, your lender will most likely send you a letter in the mail asking you to contact them to make alternative arrangements. If you don’t respond to those letters in three months, that’s when the process of a foreclosure typically starts.

A foreclosure will negatively impact your credit score and make it difficult and costly to borrow money in the future, so it’s best to avoid it at all costs.

Can Your House be Repossessed Without Notice?

Repossession is when your home is seized by your lender. This typically happens when you fail to make your mortgage payments.

Can your lender repossess your house without notice? The simple answer is no. Even if you have failed to make your mortgage payments on time, there’s a formal process that your mortgage lender must follow. Only after following these necessary steps can your lender repossess your house.

Legal action

How to Avoid Missing a Mortgage Payment

Here are some good ways to be proactive and avoid missing mortgage payments in the first place:

Have a Family Budget

If overspending is your issue, it helps to have a family budget. With a family budget, you improve your family’s financial health by allocating your income to the things that need to be paid, so that you’re less tempted to spend it on stuff that you can’t truly afford. You can use whatever works best for you: a spreadsheet, budgeting app or good old-fashioned pen and paper. You’ll want to customize the budget based on your own personal spending.

Something else that can be helpful is having separate savings accounts for different spending purposes or savings goals. You can have one account to cover your mortgage payments, one for family vacations, one for retirement savings, etc.

Track Your Spending

A budget isn’t just meant to sit in a drawer and collect dust. The second important part is tracking your spending, which helps with keeping on top of how much money you have left to spend each month.

Have Emergency Savings

For those costly emergency expenses, like urgent car repairs or a leaky roof, it helps to have emergency savings. If you have 3-6 months of living expenses saved up, you’ll be able to draw from that fund, rather than having to use the money that you’d normally use to cover your mortgage payments.

Consider a Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit, or HELOC for short, is a line of credit secured against your property’s value, so in essence you’re borrowing from the equity in your home.

With a HELOC, you can use it to make your regular mortgage payments if you run into difficulty. Although it’s not a good idea to see this as a long term plan, a HELOC can be a lifeline to help you keep up with your mortgage payments during short-term financial difficulties.

Look at Mortgages that Let You Defer Payments

Lastly, you can consider a mortgage that lets you defer payments when necessary, without penalties or fees. This usually involves making a mortgage payment in advance. If you like this extra financial cushion, it can be a useful option, but remember that deferring payments can end up costing you a lot more in interest in the long run.

The Bottom Line

It’s best to do everything possible to avoid missing a mortgage payment, as it can prove costly. If you’ve exhausted all avenues and you know you’re going to miss it, it’s far better to approach your lender proactively and make alternative arrangements to get your mortgage payments back on track.

Sean Cooper
Sean Cooper
Author & Mortgage Professional
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Sean Cooper is the bestselling author of the book, Burn Your Mortgage. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense.

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