Question

Read the scenario.

Casey has signed a 30-year fixed-rate mortgage contract to buy a house. The contract includes a clause specifying a late payment fee of 5% of the overdue amount if a payment is more than 15 days late. The contract includes a privacy clause that ensures the lender will not share her financial information with third-party companies without her consent, except as required by law. The contract states that any disputes about loan servicing or property valuation must be submitted to binding arbitration, where a third-party arbitrator will decide.

If Casey misses a payment and pays 20 days late, what is the penalty according to the mortgage contract?

a 5% increase in the interest rate
5% of the monthly payment amount
a warning letter with no financial penalty
no penalty, as Casey paid within the grace period

Answer 1

5% of the monthly payment amount.

Explanation: The contract imposes a late fee of 5% of the overdue amount if payment is more than 15 days late. Paying 20 days late exceeds the 15‑day threshold, so the 5% fee applies.