In this tough economy, home owners are increasingly struggling to make mortgage payments. The good news is that being a few days late paying your mortgage is not a big deal; most lenders give a 15-day grace period and as long as you get payment in during that time, there is no penalty whatsoever. After the grace period, you have an additional 15 days during which you will be charged a late fee. As long as you pay during this period, you are still considered to have paid on time. Now onto the bad news…
If you are 30 days late, your credit takes a hit. Depending on your beginning credit score, being just 30 days late can lower your score by 60-110 points and can take between 9 months and 3 years to fully recover from. The higher your score was before the late payment, the longer it takes to fully recover. If you start with a score of 780 and are 90 days late with a mortgage payment, your score may drop by 130 points, almost as much if you go through foreclosure. A low credit score can cost you more in many other areas too – they drive credit card rates up, affect auto loans and even drive up auto insurance premiums.
Clearly, it’s in your best interest to remain current on your mortgage payments. What should you do if you are having problems? First, keep your wits about you and don’t panic. Refusing to admit there’s a problem will not solve anything. Be proactive; contact your lender with your issues. Most of them are willing to work with you, but communication is key. Don’t just hope they won’t notice if you are late; they will.
Secondly, you need a plan. Track all of your expenditures to see where your money is going. Do it by hand, do it by computer spreadsheet; just do it. Keep track of everything for a month or two. This exercise alone may open your eyes. You may not have ever realized that you spend $15 a month on office birthday cards, for example, and may find something right away that you can cut out or reduce easily. It’s important to find out where your money is going.
Once you do that, you get to look for “extra” money. Don’t look at it as cutting things out or depriving yourself. Make it a challenge; make a game out of it. Cut back on obvious things first, like excessive shoe shopping or those office birthday cards. Analyze the expenditures you identified, and see what can easily be discarded without much trouble. Be ruthless, but make it as painless as possible. You may love your morning Starbucks coffee, but could you buy it at the grocery store and still enjoy it for less?
Then, take a closer look. There are tons of ways to save money you may not have considered. Cook more from scratch. Not only will you save money, you will eat healthier. Use generic products when possible; clip coupons and couple them with sales. Grow spices. Cut out commercial cleaners and start cleaning with baking soda and vinegar. You’ll breathe fewer toxins and help the environment at the same time. Be creative with your cost-cutting, but don’t make it painful or you will have a hard time sticking to it for long.
As you identify areas you can trim, take the “extra” money and pay that mortgage payment on time every month. You may find enough that you can even begin paying down other debts like credit cards too.
Hard times have a tendency to cause people to panic and get stressed out. You don’t need the added burdens that late mortgage payments and lower credit scores can bring. Remember, denial is never a good plan. Get help from your lender if you need it; then make a plan and stick with it.