I defaulted on my mortgage, do I have to pay late fees?

Do you want to avoid defaulting on the monthly installments of your mortgage? Avoid this scenario by finding savings solutions for your credit with credit intermediaries from Poupança no Minuto. Or first understand how much late interest can be added to your debt if you do not comply with contractual obligations, in this article.

I did not comply with the housing credit installments, what now?  

If you default on your home loan payments, it can have legal consequences, including the risk of losing your property.

Among the repercussions, if you fail to refund the credit, be prepared for the following:  

• Late interest payment;
• Owing a Debt Recovery Commission;
• Login default in the Central Credit Register map of the Bank of Portugal;  
• Seizure of your property, leaving you without it.

If three installments are not settled in a timely and complete manner as stipulated in the credit agreement, and after written notice for compliance, the banking institution may terminate the contractual obligations. That is, if the outstanding installments are not fully regularized, the bank may declare the contract due.

In the same line, the bank may also require the total payment of the outstanding loan amount, together with the due interest.

In addition, the bank entity may proceed with the enforcement of the guarantees constituted, including the execution and judicial sale of the property given as security, under the conditions established in the credit contract.

As for the Commission for Debt Recovery, established in the Bank's General Price List, it can go up to 4% of the unpaid installment value, plus Stamp Duty.

What are late payment interest rates?

Late fees are a consequence of the debtor's delay in fulfilling contractual obligations (settlement of monthly installments).  

These interest rates do not have a defined value, as they are applied according to the annual or semi-annual published rates. The amount is calculated from the period the payment date is due until the moment the debt is settled.

Late payment interest is added to the maximum annual surcharge legally permitted, which applies to the matured, unpaid capital, and to the capitalized remunerative interest.

How are default interest calculated? 

Late payment interest associated with housing credit is calculated by adding the mortgage credit interest with a maximum surcharge of +3%. In this logic, if you have a Nominal Annual Rate of 1.4%, you will pay 4.2% in late payment interest.

In practice, the calculation of late payment interest is done through a formula. This is based on the amount overdue, then multiplied by the late payment rate. To get the exact amount, divide the value by 360 days of the year and then multiply by the number of days overdue.

That is, the formula is as follows:  

(Value of debt x late payment interest penalty %) / 360 days x number of days overdue.

For example, if you have an outstanding installment debt equivalent to 700 euros from 30 days ago, with a penalty rate of 4.2%, the account should be:

(700 euros x 0.042) / 360 days x 30 days late  

0.3 / 12 x 30  

Amount to be paid in late interest: 2.45 euros

In other words, in a home loan where the monthly installment is 700 euros, the late interest equivalent to 30 days of delay is worth 2.45 euros.

Are you having difficulty paying the installments of your mortgage credit? Know that there are solutions that allow you to save with this financing! The home credit intermediaries from Poupança no Minuto can present you with solutions that best suit your context. They are just a contact away.