Default
Definition and meaning of Default in real estate.
Default is the failure of a borrower to fulfill a contractually required obligation, most commonly the failure to make monthly mortgage payments on time as agreed in the promissory note.
In more detail
When a homeowner defaults on a mortgage, the lender gains the right to take legal action to recover the debt. Typically, this process begins after a specific period of non-payment, often ninety days or more. The lender will issue a formal notice of default, warning the borrower of potential foreclosure if the outstanding balance and fees are not paid.
Defaulting severely damages a borrower's credit score and can eventually result in the loss of the property through a foreclosure sale.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Common trigger | Non-payment of mortgage for ninety days |
| Credit impact | Severe long-term reduction in credit score |
| Next phase | Foreclosure proceedings by the lender |
A homeowner loses their job and stops making mortgage payments, leading the lender to issue a formal notice of default after ninety days of missed payments.
Frequently asked questions
What is the difference between delinquency and default?
Delinquency occurs as soon as a payment is missed, whereas default is a more serious status that occurs when a borrower fails to pay for an extended period, typically ninety days.
Can you cure a default once it has occurred?
Yes, borrowers can often cure a default by paying the overdue amount, including late fees and legal costs, during a reinstatement period before a foreclosure sale occurs.
How long does a mortgage default stay on a credit report?
A default or subsequent foreclosure typically remains on a credit report for seven years, significantly affecting future borrowing ability and interest rates.
Related terms
Sources & references
See our sources and editorial standards.