How Are Mortgage Late Fees Calculated?

If you don't pay your mortgage on time, you can expect to be charged a late fee. Mortgage lenders charge late fees on any payment received after a grace period -- typically, about 10 to 15 days after the due date stated in your note. The fee itself is calculated based on a percentage of the payment due. That amount is added on to your principal and interest.

Documentation

To properly calculate a late charge, you need to know the terms. The terms can be found in the promissory note. This is the contract between you and the lender in which you agree to pay back the loan under the agreed terms. The late charge scenario is described in the payment section. It outlines your monthly payment and the percentage of that payment you have to pay in the event you are late. Typically this is around 5 percent. It will also detail any applicable grace period.

Grace Period

The grace period is a set number of days that you have to make your payment without the lender assessing a late charge. This period is typically around 10 to 15 days. So if your payment is due on the first of the month and your grace period is 15 days, you can make a payment any time up until the 15th of the month with no extra charge. On the 16th day, the late charge is added to your account.

Calculation

The calculation on a late charge is simple. Simply add the appropriate percentage to your monthly payment. If your payment is $750 and the late charge as outlined in the note is 5 percent, multiply 750 by 0.05. This give you a late charge of $37.50, making your total payment due $787.50. If the late charge is not paid, it will carry over to your next payment and continue in that manner until you ultimately pay it or get it waived. You will only be in line for a waiver if you don’t have a history of late payments or if the lender made an error on its end.

Reporting

While a late charge is certainly undesirable and doesn’t do anything to ingratiate you to the lender, the damage will be minimal if you make your full payment, including the charge, as soon as possible. Simply being a few days late, even past the grace period, won’t affect your credit score. Once you’ve gone 30 days past your due date without making a payment, however, you will be considered delinquent. At that time, the lender will report the delinquency to the major credit bureaus, lowering your score in the process.

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