Definition of "Delinquency"

Patty Rainey real estate agent
Patty Rainey, Real Estate Agent Crye Leike Realtors

Haven’t you ever paid a bill a few days after the due date? It happened to all of us, not necessarily because we didn’t have the money, but because we simply forgot about it. A delay of a few days on a bill is not such a big deal, yet, according to the definition of delinquency, theoretically, you were delinquent on it. For most invoices and bills there is a grace period. During that time, the company or the bank doesn’t initiate any other measures to recover the debt. As long as you pay your bills or make your loan current within that grace period, your debts are not in delinquency.  But, if you fail to pay in full the amount due, you may be contacted by a collection agency. 

Every borrower should know the definition of delinquency when they are granted any type of loan, but especially when contracting a mortgage. All other debts fade in front of a mortgage. You should do whatever it takes to pay it on time, every month unless you want to lose your property. It is better to postpone the payment of other unsecured debt than to pay your mortgage late. So, delinquency is not necessarily bad as long as you are aware of it and it helps you avoid foreclosure. However, ending up in delinquency too often may affect your credit score. 

A home loan is generally delinquent for 270 days, counted from your last payment. So, in about 9 months, the bank may decide to foreclose on your loan if you don’t seek any kind of settlement. Just because your mortgage is delinquent, it doesn’t mean that you will lose your house. Yes, it is very likely for that to happen, but you can stop a foreclosure by making payments of any amount while your loan is delinquent. Be aware that your loan may accrue interest and penalties during this time, though. 

However, there is a piece of good news. Loans are not considered delinquent until after 15 days past the due date. Most mortgages have this grace period of 15 calendar days which allows borrowers to pay their debt without incurring other costs. And as long as you pay within the grace period, your credit score is not affected

Now that you know the definition of delinquency, we hope that everything is clear and you can better manage all your monthly payments.

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