Mortgage Due Dates 101

September 11, 2012 13 Comments »
Mortgage Due Dates 101

If you recently took out a mortgage, or have been thinking about financing a piece of property, you may be wondering when your mortgage payments will be due each month, among other things (like how late Ikea is open).

Well, mortgage payments are generally due on the first of the month, every month, until the loan reaches maturity, or until you sell the property.

So it doesn’t actually matter when your mortgage funds – if you close on the 5th of the month or the 15th, the pesky mortgage is still due on the first.

The difference is when the first mortgage payment is due, which I’ve explained in my when mortgage payments start post.

Due on the 1st, Late on the 16th?

Most people probably know that mortgage payments are due on the 1st of the month, but many loan servicers (those who collect your payments) will allow you to pay 15 days “late” each month.

So even though your mortgage payments are technically due on the first each month, you can pay as late as the 15th every month without any kind of penalty.

This is known as the “mortgage grace period,” similar to other grace periods you see with all types of other loans.

Some “savvy” consumers may even set up automatic payments to be sent mid-month, instead of paying on the first to maximize cash flow.

But this can be a dangerous game, especially if your mortgage payment doesn’t make it to the servicer on time, for whatever reason.

Nowadays, this may be less of a problem thanks to speedy and generally reliable online payments, but it’s still a risk not worth taking.

The servicer may also harass you if you consistently pay late into the grace period.

What If I Pay My Mortgage Late?

If you play this “pay at the last minute game” each month, you could eventually get burned and wind up paying a mortgage late fee.

These fees can vary, but are often pretty steep. We’re not talking a $20 late fee and a slap on the wrist.

We’re talking a percentage of the mortgage payment, such as 5%. So if your monthly mortgage payment is $3,000 a month, that’s $150 smackers.

And if you wait too long to make a payment, it could eventually be reported to the credit bureaus, which will really hurt.

The result could be a substantial credit score ding, and more difficulty obtaining subsequent mortgages in the future.

After all, lenders aren’t too fond of homeowners who don’t make their mortgage payments on time.

What If I Pay My Mortgage Before the Due Date?

Okay, so we know paying late isn’t too smart, but what about paying the mortgage before the due date?

You might be thinking, “Hey, I can save money on interest if I make my payments on the 20th or 25th of each month, instead of the first of the next month.”

Not the case. The servicer may accept your payment on that date, but it won’t mean you’ll pay less interest.

The interest is already figured out for the month using the previous month’s balance, so it doesn’t matter if you pay a few days early.

This differs from credit cards and other types of loans, such as HELOCs, where the interest is calculated daily.

If you actually want to pay less in interest on a traditional mortgage, you need to make extra principal payments.

So if you pay an additional $100 on top of your monthly mortgage payment, your loan balance will be $100 lower for the subsequent month, and that means less interest paid over the life of the loan.

This will also reduce the loan term, meaning your mortgage will be paid off in less time.

Just note that the monthly mortgage payment will stay the same, regardless of whether you make larger payments for a few months here and there.

Tip: Be careful when making extra principal payments. If you send in a payment that is below the monthly mortgage payment, such as two smaller biweekly payments, even if they exceed the total amount due, they may not be credited properly.

All said, speak with your loan servicer once you take out your mortgage to ensure your payments are processed properly. Rules vary and it’s best to get all the answers straight from the horse’s mouth.

(photo: adactio)

13 Comments

  1. Lucas June 11, 2014 at 3:15 pm -

    I wish people would look at this! Working for a mortgage company people do not understand this concept! Thank you for the information!

  2. RandallTo May 4, 2015 at 10:22 am -

    Chase will post all money above payments for that calendar month as principal. Bank of America seem to post all extra money as the next months payment unless specified otherwise as principal.

    Having an early due date like the 1st or 2nd and banking with Chase can be tricky paying your mortgage payments around a weekly pay period. If your payment gets there on the 31st (intended for the 1st), bam, you just posted a principal-only payment and you now owe another mortgage payment the next day, or risk foreclosure proceedings to start in 30 days.

  3. Colin Robertson May 4, 2015 at 3:36 pm -

    Randall,

    Thanks for sharing that info. The takeaway is that you need to know your lender’s policy to avoid any missteps. And it’s usually wise to notify your lender if any extra payment should go toward principal.

  4. Roger June 6, 2015 at 8:37 am -

    I was with the understanding that due on the first meant it is due on the first but the lender or department store must allow 15 days before it is marked late….. I just got off the phone with Kohls and I have a late fee of 35.00 every month for the past 5 months….. I pay all my bill on the first week of the month and never had much of a problem…. Kohls is just making this because they can get extra money for nothing….

    I spend a couple of hundred dollars every other month at Kohls… NO More, their loss…. I need to find what the government rules are… do you know the site I should go too… hope so Roger Fossette

  5. Philip Kaplan June 13, 2015 at 3:25 pm -

    Conversely, can a lender subsequently change the payment date without informing a customer in writing? If they do not inform the customer in writing what steps can the customer take?

  6. Colin Robertson June 18, 2015 at 10:39 am -

    Philip,

    I would assume they would have to let you know, but I don’t know their terms or why they would change your payment due date.

  7. ronnie June 29, 2015 at 4:45 pm -

    My wife is a school teacher, no income over the summer. We pay the summer months mortgage payments ahead (conventional escrowed month to month mortgage.). I realize that there is no benefit by paying early (paying for June, July, August and September’s payments in May, but if I pay additional principle with each of these payments (+$50 with each mortgage pmt) will the additional principal added to the mortgage payment be applied to the principal balance due as of May when the payments are sent in or when each of the actual payments is actually due?

  8. ronnie June 29, 2015 at 4:57 pm -

    Also, let’s say as of May 1, 2015 I have paid my mortgage up to September 2015. I decide on July 1, 2015 to make a principal only payment of $500. Will that principal payment be applied as of the date rec’d (in July) or will it be applied when my next mortgage payment is actually due, October 1, 2015, because I paid ahead?

  9. Colin Robertson July 1, 2015 at 2:11 pm -

    Ronnie,

    No point in speculating – best to ask your servicer directly how payments will be applied. The extra principal payments are better served by being applied as soon as possible to lower interest expense in subsequent months.

  10. Chris M July 10, 2015 at 6:53 am -

    We sent in our first mortgage payment which is due on the 1st of the month. How long typically will it take for your lender/bank to cash your mortgage payment? the First payment had to be mailed in. Should I expect to see the withdrawal by the middle of the month?

  11. Colin Robertson July 10, 2015 at 11:34 am -

    Chris,

    It depends on the bank really. But it generally shouldn’t take more than a few business days after sending it.

  12. Dave B July 31, 2015 at 6:22 am -

    Thank you for the information here on “late” payments. I had looked into my loan paperwork for my mortgage and it says that I will be charged at late fee after 15 days. My question is if I pay my mortgage 6 days after its due date once will there be a mark on my credit report for it?

  13. Colin Robertson July 31, 2015 at 8:19 am -

    Dave,

    Late payments don’t generally show up on credit reports until you’re 30+ days late…

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