What can happen if a borrower misses a mortgage payment?

When a borrower misses a mortgage payment, one of the most common consequences is the imposition of a penalty fee. This fee serves as a form of financial repercussion meant to encourage timely payments and compensate the lender for the inconvenience and potential risk associated with that missed payment. Lenders typically outline this information in the mortgage agreement, indicating the consequences of late payments, including when a penalty might be applied.

The other options do not reflect standard practices following a missed payment. Loan forgiveness is not something that usually occurs automatically as a result of missed payments; instead, loans typically continue to remain due. An increase in the interest rate generally requires specific circumstances or actions, such as a borrower consistently missing payments or failing to meet other contractual obligations. Similarly, extending the loan term isn't a standard consequence of a missed payment; it might happen in specific situations, but it is not a rule that applies universally.