Definition
Delinquency
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Delinquency is simply a term that describes a mortgage payment that has been late for more than 30 days.
As the homes of borrowers would understandably be one of their priorities, one would expect that repaying the home loan obligations would be one of the first things that a homeowner would do upon receiving his pay cheque.
Being late for a few days can be understandable as sometimes people travel and don’t make payment before they went on holidays. Or sometimes forgetfulness can get the better of anyone and result in an oversight of payment due date.
But to be late in payment for more than 30 days, when the next payment is already due, can send serious signals to a lender.
A loan repayment account that has payment due for over 30 days is said to be in delinquency. And the borrower would be termed as being delinquent.
Delinquencies would negatively impact the credit report.
But it must be said that a 30-day delinquency is considered a minor offense compared to a 90-day delinquency which is considered severe.
Borrowers who are delinquent could have their credit scores battered, resulting in difficulties in obtaining other types of credit facilities such as credit cards and personal loans.
On top of that, depending on the terms of the mortgage loan agreement, a borrower could be liable to pay penalty fees on the account.
If the borrower refuses to pay these charges, then the bank would most probably add the charges to the loan balance that can result in negative amortization.
Whatever the reasons, because of how bank have the leverage in mortgage agreements, a borrower would have to pay these fees one way or another should the lender decide to enforce them.
There’s no getting away from this one.
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