Can’t make mortgage payments? Now what?

December 27th, 2013 madmin
Couple unhappy

The prospect of losing your home because you’re having a hard time making your mortgage payment can be terrifying. Maybe you’re having a hard time making ends meet because you or a family member lost their job. Or perhaps there was an unexpected medical expense that is taking a toll on your finances.

Whatever the reason, it’s important to address your struggles with your mortgage payment as soon as possible. The quicker you can nip the problem in the bud, the better.

If not being able to make your mortgage payment is a reality for you, here are some of the options you have:

Sell your home

If the real estate market in your area is strong, selling your home may be an option. This may provide you with enough funds to pay off your current mortgage debt in full.

Mortgage modification

A loan modification is the process where the terms of a mortgage are modified outside of the original terms of the contract agreed to by the lender and the borrower. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving, or cancelling, a portion of the mortgage debt.

As soon as you realize you can no longer handle your mortgage payment this should be one of the first things to look into. However, before you do so make sure you are prepared to show that you have made a good-faith effort to pay your mortgage. If you can show that you’ve reduced other expenses, it’s more likely that they will negotiate with you.

Forbearance

Forbearance is an agreement between the mortgage lender and borrower in which the lender agrees not to exercise its legal right to foreclose and the borrower agrees to a mortgage plan that will bring the borrower current on payments. This is a short-term agreement designed for borrowers who have current financial problems caused by temporary financial hardship. Unlike the loan modification, the payment arrangement is temporary and, at the end of the forbearance period, your payment will be higher because you will be catching up the past due amounts.

Short sale

A Short Sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage company agrees to a short sale, the lender then accepts the less-than-full repayment of the mortgage and the borrower is released from the mortgage obligation. The lender would agree to this type of sale in order to avoid what would amount to larger losses for the lender if it were to foreclose on the mortgage.

Check with your lender to determine if you qualify for any of these – or other – options. There are also housing counseling agencies that can help you determine which, if any, of these options may meet your needs and assist you in interacting with your lender.

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