What are late fees on a mortgage?

Q: What are late fees on a mortgage?

A late fee is a charge the mortgage documents allow when a payment is not made on time. The CFPB says most mortgage contracts also include a grace period. State law may further limit the amount, and there is no typical national percentage in the brief.

Short answer

A is a charge the mortgage documents allow when a payment is not made on time. The CFPB says most mortgage contracts also include a grace period. State law may further limit the amount, and there is no typical national percentage in the brief.

Full explanation

If a mortgage payment is late, a late fee may be charged. The CFPB says most mortgage contracts include a grace period before that fee applies. The fee can be charged only in the amount the signed mortgage documents specifically authorize. State law may also cap what can be charged.

For a loan still in application, page 3 of the Loan Estimate shows the late-fee terms. For a loan already being repaid, page 4 of the Closing Disclosure shows them. Paying on time avoids the fee and protects the credit record.

A Loan Estimate and Closing Disclosure are not used for a reverse mortgage, a HELOC, a manufactured-home or mobile-home loan without a real-estate security interest, or a subordinate loan through certain homebuyer-assistance programs. Those products use Truth-in-Lending disclosures; a reverse mortgage also uses a Good Faith Estimate and a HUD-1 Settlement Statement. The brief does not publish a current typical late-fee percentage as a national rule. A CFPB complaint can be filed online or at (855) 411-CFPB (2372).

Sources reviewed