When do you start paying off your mortgage?

When a lender approves a home loan, you'll often need to start paying off the mortgage one month after the settlement date. You’ll need to manage your cash flow carefully after paying the deposit and other major upfront costs when purchasing your new house. You'll also need to budget for when you start making repayments. 

When should you ideally start paying off your mortgage?

The due date for your first mortgage payment is often one month after your settlement date. This could mean that if your loan settles on 8 July, your first repayment will be due on 8 August. 

In some cases, the first payment will be due on the first day of the first calendar month that commences one month after settlement. For example, if settlement on your home purchase is on 15 May, you may not have to make the first mortgage payment on 15 June. Instead, you may have to start paying from 1 July. 

Depending on when your loan settles, this could give you more time to get the money for your first repayment together. Of course, you may also need to make a smaller extra repayment to make up for the odd weeks.

While many individuals agree on monthly repayments, you can speak with the lender and request an adjustment to the repayment cycle. For example, if you opt to make fortnightly or weekly repayments, you may save some money on interest due to the way some banks calculate interest charges.

Different mortgage lenders use different systems and follow different guidelines. Consider contacting your mortgage provider for more exact details of when your first repayment may be due. 

Keep in mind that when it comes to your early mortgage payments, most of each payment will consist of interest charges. It may be several years before your repayments start making a significant dent in your mortgage principal. You can use a mortgage calculator to get a breakdown of how your repayments will start paying off your mortgage, and the effect that extra repayments could have on your home loan budgeting.

What happens if you miss a repayment?

If you miss a mortgage payment, your lender will send you a late payment notice with a due date of when they expect your next repayment. The lender may also impose a late fee. If you only miss the one repayment, and can keep making regular repayments afterwards, the long-term effects could be minimal, though payments more than 14 days late may still be recorded in your credit history.

If you have problems paying your mortgage, you can contact your lender to see if they’re able to assist, such as by putting a financial hardship plan together, or adjusting your loan terms.

But if the lender is unable to get in touch with you about a missed repayment, they may issue a default notice, indicating that you have 30 days to make your repayment before they take legal action. A default on your home loan will be recorded in your credit history, and will likely make a significant negative impact on your credit score for several years. 

If you can’t keep up with the payment plan, you may want to consider contacting a mortgage broker or a financial counsellor to seek an appropriate solution. This could range from refinancing your loan to making changes to your income and expenses. 

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