Falling behind in mortgage payments does not always have to lead to foreclosure. Move swiftly and work with your lender in order to avoid losing your home.
Potential Late Payment Remedies
Many lenders will offer assistance to homeowners who have fallen behind but want to keep their homes. Remedies that may offered by mortgage lenders range from temporary fixes to permanent restructuring of the loan.
Examples of options your lender may propose include:
- A one month "skip pay" to allow you to get your finances back under control. This option is generally only offered to homeowners who are not yet late with payments and who have never been late, but your lender may make an exception if you ask.
- An additional payment plan for the payments that are behind. You will continue to make your regular mortgage payments but will additionally make payments for the amount you owe from missed payments.
- A modification of the entire mortgage loan. Modifications may include forgiveness of late fees, a lowered interest rate, or some other modification that will allow you to get your mortgage debt under control.
Mortgage Modifications
A mortgage modification restructures the loan to give you a monthly payment that you can handle with your current financial situation. Modifications used to be used primarily to allow borrowers to lower their mortgage interest rate without a full refinance, but when the housing crisis arose it became much more common for lenders to offer modifications as a way to allow homeowners to avoid costly foreclosure.
Borrowers must apply for mortgage modifications. Your first step should be speaking to your lender to find out about modification options. View this sample hardship letter to start composing your own request or visit the website for Making Home Affordable, which is a government program designed to assist struggling homeowners.
Guaranteed Mortgage Loans
If your mortgage is guaranteed by FHA or the VA, contact the guaranteeing agency in addition to your lender. You may be able to obtain assistance from the agency that guaranteed your mortgage; these agencies have programs in place to provide remedies - both temporary and permanent - for homeowners who are struggling financially.
Other Possible Solutions
What do you do if you are late with your mortgage as a result of your financial difficulties but do not qualify for assistance or modification? You need to take a close look at your financial situation. Is it realistic to assume that you can continue to make your mortgage payments after you bring the loan into current status, or are you fighting a losing battle? Seek the advice of a financial counselor to find out if your mortgage is reasonable for your income, or if it may be time to figure out an alternative plan. Find a financial counselor by contacting a credit counseling service or check with your bank/credit union to see if they offer personal finance counseling for free.
Other possible options to bring your loan back into current status include:
- Use savings accounts or retirement accounts to bring the loan up to date. Note that cashing in retirement accounts may result in steep penalties.
- Obtain a personal loan for the amount of money you need to make the loan current.
- Refinance the mortgage loan.
- Sell the home. Consider a short sale if necessary.
Be Proactive in Approaching Your Lender
In an ideal situation, you should approach your lender before your mortgage falls behind. Your negotiations will typically go much more smoothly if you contact your lender beforehand to work out a solution prior to the payment actually being late.
On the other hand, it is important to remember that you should never avoid contact with your lender after you have fallen behind. You will never know what programs or options your lender has available to assist you if you refuse to speak to your lender. Instead of avoiding contact with your lender, work with your lender to come up with a solution.
The truth is that mortgage lenders are much more adept at helping struggling homeowners now than they were in the past. Take advantage of every program available to you in order to bring your mortgage loan back into current status.
