- When you have a mortgage, you must make regular payments to the lender in accordance with the terms of your loan agreement. When you fail to make a payment on time, this is known as an arrearage. Technically, you have a mortgage arrearage whenever you are late even by a single day past the payment due date. What impact this has on your mortgage or your finances depends on several other factors.
- While mortgage arrears are generally late payments made on your mortgage, including both your monthly payment and interest, just because you have a mortgage arrears does not necessarily mean you are in default on your mortgage. For example, some creditors may allow you to fall as much as 90 days behind on payments before you fall into default and the creditor initiates the foreclosure process.
- People with mortgage arrears may incur penalties, fines or late payment fees depending on the term of the mortgage. Mortgage payments can be due at different time of the month, and lenders often give a grace period for borrowers, such as allowing for up to 15 days after a payment is due before assessing fines or penalties. However, the terms of your mortgage dictate these practices, as well as how much in fines you actually have to pay for a late payment.
- Lenders typically report late payments to credit bureaus, which then place the late payment history on your credit report. This in turn lowers your credit score, though by how much depends on numerous other factors. In general, late payments and negative information must remain on your credit report for seven years. However, more recent late payments have a larger negative impact on your credit score than do older late payments.