Definition:
A partial payment is when a borrower pays only a portion of the total amount due on their mortgage, rather than the full scheduled monthly payment. This can happen intentionally or due to financial hardship.
Example:
Samantha’s monthly mortgage payment is $1,500. One month, due to unexpected car repairs, she can only pay $1,000. This $1,000 is a partial payment and doesn’t cover the full amount owed for that month.
Explanation:
Lenders generally expect full monthly payments on time. However, some borrowers may face temporary financial issues and submit a partial payment instead. Whether a lender accepts a partial payment depends on the loan agreement and the lender’s policies.
If accepted, the lender might:
- Hold the partial payment in a suspense account until the rest is paid
- Charge late fees
- Report the payment as incomplete to credit bureaus
- Refuse the payment and return it to the borrower
Repeated or unresolved partial payments can lead to delinquency or even foreclosure if not addressed. Borrowers should always communicate with their lender if they know they can’t make a full payment, as there may be hardship programs, loan modifications, or forbearance options available.
Partial payments may also come into play during closing, escrow disputes, or when adjusting final payoff amounts.
Why is Partial Payment Important in Real Estate Transactions?
Partial payments matter because they can affect a borrower’s credit, loan status, and ability to refinance or sell the home. For buyers, understanding how lenders treat partial payments helps maintain a healthy loan. For sellers, unresolved partial payment issues could delay a sale. Staying current on full payments is crucial for keeping a mortgage in good standing and avoiding costly complications.