Although defaults on mortgage payments have been steadily falling since 2008, there were still almost 300,000 filings for foreclosure in the first six months of 2019.
If you are missing your mortgage payments, it’s best to face the issue head on, as keeping your home free from foreclosure is paramount. After all, it’s not just the effect of foreclosure on your housing situation, but also on your finances. A foreclosure will cause your credit rating to drop, which may make it difficult to buy again, or rent, for several years.
Your two main choices? Renegotiate or amend the terms of your mortgage or sell your home.
The first step, though, is to contact your mortgage provider the moment you start missing mortgage payments. It’s actually in your lender’s best interest to help you avoid foreclosure, and many have ways which can help you get through temporary financial problems.
Another option is to speak with a counsellor at the Department of Housing and Urban Development, and get advice on your budgeting or credit card debt which may be affecting the ability to pay your mortgage.
§ Agree with your lender to amend the terms of your mortgage
Revised payment plan
You may be able to negotiate a revised repayment plan with your mortgage provider. With your lender’s approval, your overdue amount, plus your regular mortgage payment, can be spread across a specified period, say, 3 to 6 months until you become current and continue payments as usual.
Permanent modification to loan
A loan modification involves a permanent restructuring of your existing mortgage so that mortgage payments will be more affordable. This may include changes to the interest rate, changing from a variable rate to a fixed interest rate, or extending the length of the loan term to reduce the monthly payments due.
By refinancing, you can obtain a better interest rate and more affordable monthly mortgage payments. Furthermore, if you have enough equity in your home, you may even be able to secure a cash-out refinance loan to help pay off more expensive credit card debt.
A mortgage forbearance agreement typically stipulates that the mortgage lender will not initiate foreclosure proceedings provided you agree to and follow a plan to become current on your loan repayments. Although payments may be deferred during the forbearance period, you will ultimately be responsible for making up missed payments, plus pay interest, taxes and insurance.
§ If you have to sell your home
If it’s not possible to agree changes to your mortgage loan and you have to sell your home, the three most common workout methods are:
If you’re not yet behind on your mortgage and your home is worth more than the amount you owe, you can find a suitable realtor and list your property for sale as you normally would.
If the value of your home is less than the total due on your loan, the lender may allow you to sell the property for less than what is owed–a “short sale”. The lender will lose money but if they can recoup the majority of their loan, it is preferable to a foreclosure.
Deed in Lieu of Foreclosure
Here you hand over the property deed to your lender and are released from all obligations of the mortgage, thereby relinquishing your home and any value associated with it. This allows all parties to avoid a lengthy and expensive foreclosure.