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The Difference between Mortgage Delinquency and Default

With so many people struggling to keep up with their mortgage loans these days, we�ve seen more mortgage delinquency and defaults than ever before. However, many people seem to confuse the meanings of delinquency and default. While they have similar connotations, these terms are quite different from one another. Obviously, having your mortgage in delinquency or default is never a good idea, but neither one necessarily means you�ll go into foreclosure. Here�s a look at some of the main differences between mortgage delinquency and default that every homeowner should know about:

Mortgage Delinquency

When you agree to your mortgage terms and sign your contract, one of the key points will be the date in which your payments are to be made. For most people, their mortgage payment is always due on the first of the month. If you should fail to make your payment on time for any reason, your mortgage loan will go into delinquency. Depending on how long you go without making a payment, you likely risk late fees, a higher interest rate, and eventually going into default. Every lender�s policies regarding delinquency are different, so make sure you read the fine print of your mortgage if your loan goes into delinquency. As far as your credit score goes, most lenders will report a delinquency to the credit bureaus and your score will likely suffer the consequences.

Mortgage Default

After your loan has been in delinquency for awhile without having received any payments, it will be considered defaulted. Depending on your lender�s policies, it could be anywhere from 60-150 days before your mortgage takes the transition from delinquency to default. You�ll typically receive a notice of default and information about the next steps your lender may take. At this point, your lender has the right to foreclose your home if you still do not make any payments on your mortgage. Like delinquency, mortgage loans in default will show up on your credit report and could potentially have a negative effect on your score.

What You can do about Delinquency and Default

Obviously, the best way to solve issues with your mortgage going into delinquency or default is to make a payment. However, we know that you might not always have the resources to do that, in which case it�s very important that you at least contact your mortgage lender. In fact, you should do so the second you have any inclination that you might not be able to make your full mortgage payment on time. Talk to your lender about your situation and see if you can�t work out a new payment plan or at least get an extension on the mortgage due date. Lenders are well aware that many homeowners are struggling with their mortgage loans and most are more than willing to work something out. As long as you continue making payments on your mortgage in some shape or form, you should be able to avoid going into foreclosure.

National Rate Averages

Mortgage Rates

Product Rate
5/1 yr ARM 3.147%
1 yr ARM 3.299%
15 yr fixed 3.221%
30 yr fixed 3.815%

Home Equity Rates

* Updated Jun 7, 2012