What happens if you miss a mortgage payment?

If you miss your mortgage payment, you should speak to your lender as soon as possible. It’s important to understand that your home could be at risk if you’re not able to keep up with your payments, so speaking with your lender and agreeing on a plan to repay what you owe is key.

Generally, when you miss one payment, the lender will report your missed payment to the credit reference agencies (like Equifax or Experian) and you’ll see a drop in your credit score.

Depending on your mortgage agreement, the lender might also add a late fee that you’ll need to pay as well.

If you miss the next payment and the late fee, your mortgage might not be considered current.

If you miss your mortgage payments for three months, you’ll usually default on your loan, leading to your lender taking steps to recover the money owed.

Repossession and court action should be a last resort – you should be able to speak to your lender and agree on a repayment plan or seek financial advice from a charity like Citizen’s Advice, StepChange or National Debtline.

If you’re worried about missing or late mortgage payments, you can do a couple of things.

Contact your lender

If you’ve missed a payment, or you think you might miss a mortgage payment, contacting your lender is a good first step. Getting the money back from you is in the lender’s interest so they’ll usually take you through your options – like a temporary repayment plan or a change to the length of your agreement.

Reach out to a charity for help

There are several charities who were set up specifically to advise people who are struggling with debt issues. They should work with you to get your mortgage back on track. If you need financial advice, you can speak to dedicated charities like National Debtline and StepChange and ask one of their experts for guidance. You can also reach out to Citizens Advice.

There are charities who can give you financial advice, about your mortgage or other loans.

Citizen’s Advice, StepChange and National Debtline are some of the options out there.

Lenders can start the process after you’ve missed three months of payments.

But repossession is a last resort – lenders should have already taken steps to work with you and referred you for independent debt advice.

That’s why it’s important to speak with your lender – or a debt charity – to make sure you’ve explored all your options.

Missed payments appear on your credit report after about 30 days and can stay on there for about six years. Once the late or missed payment is on your credit report, your credit score is likely to drop.

A lower credit score can make it more difficult for you to get other types of credit – like a credit card or personal loan – so it’s best to wait for your score to improve before applying for something new.

If you’re able to make the payment before the 30 days are up, you might not see it on your report (although you might have to pay late fees).

Most mortgages come with a grace period of about 15 days but it can vary from lender to lender. It should be in your contract but you can also speak to your lender and check.

Grace period = a set amount of time where you’re not penalised for late payments. So, if you realise you’ve missed your mortgage payment, but pay within the grace period, your lender won’t be able to charge you a late fee.

When you speak to your lender, they might be able to arrange a payment holiday. This is where you will be able to stop paying your mortgage for a set period of time. It’ll depend on the lender, their processes, and your own circumstances. Remember – interest will continue to be applied.

Late or missed payments stay on your credit report for about six years and knock your credit score down. But there are things you can do to help your score improve again:

Pay on time and in full

Once you’ve worked the next steps with your lender, try and pay all your bills on time and in full going forward. So, if you have a credit card, car finance or another loan, keep an eye on the due dates.

Try to lower your credit utilisation

How much credit you use is called ‘credit utilisation’. Using less than your total credit limit, and paying it back on time and in full, can help you in the future. That’s because you’ll have a track record of paying back money responsibly.

Generally, it’s recommended that you use somewhere between 10% and 30%.

You could still get a new one if you have a few missed or late payments on your credit report from a previous mortgage.

Lenders will usually look at the number of missed/late payments, and how recently they happened. Because your application for a mortgage will depend on your circumstances, speaking to a mortgage advisor or to the lender could help you understand your options.

A mortgage is a big commitment so planning ahead is key to staying on top of your payments. Here are a few things you can do to avoid missing mortgage payments in the future.

Set reminders

Adding a recurring reminder to your calendar can help you visualise what payments are due. Setting up a coinciding alarm to go off a day or two before can also give you the chance to move money between your accounts ahead of the due date.

Use automatic payments

Setting up automatic payments can give you peace of mind because you’ll know the money is coming out of your account without having to manually transfer it.

Look for help if you need it

And remember, you can always reach out to debt charities for financial advice.