What Does It Mean to “Default” on a Mortgage Loan?

If you fail to comply with the terms of the promissory note or mortgage (or deed of trust) that you signed when taking out your home loan, you’re considered in “default.” Read on to learn what types of contract violations constitute a default and the consequences of defaulting on your loan.

Different Ways to Default On a Mortgage Loan

The most common type of default is falling behind in the required monthly payments. But breaching other terms in the loan contract is also considered a default. For instance, you’ll likely be in default if:

• You don’t pay the property taxes—assuming you don’t have an escrow account. (Learn what happens if you don’t pay your property taxes.)
• You don’t pay your homeowners’ insurance bills (again, assuming you don’t have an escrow account for this purpose).
• You allow the property to deteriorate or you commit waste by causing damage that lowers the value of the home.
• You transfer the deed to the property to a new owner without getting the lender’s permission.

Consequences of Default

Once you default on the loan, the lender can demand that you immediately repay the entire outstanding balance, which is called “accelerating the debt.” Sometimes, though, you’ll get a notice before the loan is accelerated, which will give you the chance to fix or “cure” the default.

If you don’t repay the full loan amount—or cure the default—the lender can foreclose. However, under some circumstances, federal law requires the servicer to hold off for 120 days before starting a foreclosure. (To get an overview of how foreclosure works in your state and find links to more detailed articles covering state foreclosure procedures, see our Key Aspects of State Foreclosure Law: 50-State Chart.)

Talk to an Attorney

If you’re facing a possible foreclosure because you’ve defaulted on your mortgage loan, consider talking to a foreclosure attorney. If you have questions about ways to avoid a foreclosure, like by getting a mortgage modification, contact a HUD-approved housing counselor.