When you fall behind on your mortgage payments, you can find yourself in real financial trouble. Soon after you have missed a few payments, you will start to get phone calls and letters threatening foreclosure. Before the bank moves on to the final step and they take your home, you have a few options.
1 Pay What You Owe
For some people, catching up on mortgage payments is not an option. You would need to pay the payments and any fines and fees associated with you late payments. If you are desperate to catch up, you can try to get a loan from a friend or family member. You could get a second job or cash in some of your assets. You will have up until the day before the final foreclosure sale to make the payment in full.
2 Rent the Property
If your mortgage is low enough, you can rent it out for the same amount of the mortgage. This will allow you to keep your home, even though you are living somewhere else. When your financial situation improves, you can move back into the house. If you are going to rent out your home, you need to understand that there will be landlord responsibilities and other expenses associated with renting out the property.
3 Loan Modification
If you have money to make payments on your mortgage, but you don’t have enough to bring your account current, your lender might be willing to change the terms of your original loan. The new terms could absorb the delinquent payments and it will make your monthly payments more affordable. They could even permanently change your loan by adding the delinquent payments to the end of the loan. In order to qualify for a loan modification, you would need to qualify and provide documentation. Since many people have credit card debt, student loan bills, medical bills, and car payments, many people won’t qualify for a loan modification.
If your credit is still good and you have enough equity in your home, you could refinance to a more affordable loan and make lower payments. If you purchased your home with no down payment or a small down payment, or if your home has gone down in value rather than up, refinancing is not an option.
5 Forbearance (Payment Plan)
A forbearance is where you would pay only a portion of your mortgage payments or no payments at all for a set period of time. This will give you time to rectify your financial solution by saving money, paying off bills, finding a job, or finding a second job. When the time period has ended, you would start making your regular mortgage payments along with a little extra to start working on the past due balance.
In some situations, bankruptcy can save your home. When you file for bankruptcy, it could stall the foreclosure for 6 months. This will give you a chance to continue living in your home and you can start repaying your lender under different terms. If you have non-mortgage debt that has been keeping you from paying your mortgage, bankruptcy will eliminate this debt and you can start making your mortgage payments. It is important to understand that if you don’t start making your payments after the 6 months is over, you home will go back into foreclosure. Also, filing for bankruptcy is expensive and it can cause serious damage to your credit score.
If you don’t want to lose your home to foreclosure, you do have options. If you take advantage of one of these options and rectify your financial problems, you could spend the rest of your life in the home that you love.