Steps to take if you are behind on your mortgage payments.
Learn what to do and steps to take if you are behind on your mortgage. As the sooner a homeowner acts, the more options they have and the more likely they are able to get some form of help. Learn what to do if behind on mortgage payments.
First thing - contact your mortgage servicer / lender
If you are having trouble paying your mortgage and making your payments on time, immediately contact your loan servicer to discuss your options. In fact, it is best to contact them before even missing a payment. If you call them early on, most lenders, whether a bank or fintech company, are more than willing to work with customers that they believe are acting in good faith. Explain your financial situation honestly . Ask about any programs they may offer such as forbearance, home loan modification, re-instatement or repayment plans. However, the longer you wait to call and communicate with your lender , the fewer options you will have. If you delay starting this process the provider will be less willing to offer you options. For example, if there is no communication and after you have missed a few payments on your mortgage (or even if you are late), most home loan servicers will not accept a partial payment on what you owe. They very well may also start to increase the fees on your account and file a report with a credit reporting agency. Unless you have been in close contact with them, they will immediately start the foreclosure proceedings unless you come up with the money to cover all your missed payments, plus any late fees. Reinstatement : You pay the lender the entire past-due amount, as well as any overdue mortgage type expenses or late fees, by an agreed upon date. This option is very likely to be successful if your problem in paying your mortgage is temporary and your need for help is short term. Repayment plan : Your loan servicer gives you a predetermined amount of time to repay the mortgage amount you are behind. They will do this by adding a portion of the loan that is past due to your regular payment. If you have missed a small number of payments, this option may be appropriate as it should not be too difficult to get back on track. Forbearance : Your mortgage payments are suspended or reduced for a period that your servicer and you agree to. It can range from weeks to months. At the end of that period, you immediately resume making your regular loan payments along with a lump sum amount that was agreed to. So while the money is still due, it provides the homeowner time. Learn more on
Mortgage Forbearance
. Loan modification : You and your loan servicer both agree to permanently change the terms of the mortgage in order to make your payments more manageable over the long term. Modifications can include everything from lowering the interest rate, adding missed payments to the balance, or even extending the length of the time you have to repay. A loan modification is often necessary if you are facing a long term reduction in your income. Get details on
- home loan modification
. As part of the communication process, get your personal financial documents in order . In all cases, at the same time you contact your mortgage servicer , you must be prepared to show that you are making a strong, good-faith effort to pay your mortgage on time. As an example, if you can show that you have reduced other expenses and paid other bills on time, your lender will be more likely to provide you with help and is more likely to negotiate with you.
Review all the possible remedies your mortgage servicer may communicate
Review your home loan documents . There are also free legal aid lawyers or HUD counseling organizations that can help with this as well as the terminology can be complicated. Understand your grace period as to how long you can miss a payment for as well as late fee structure and default terms. Your contract outlines what the lender can and cannot do. Look for any language in the contract around “loss mitigation” options and any specific timelines regarding default or foreclosure proceedings. HUD counselors offer free advice and can guide you through this process too as well as explore solutions. A HUD agency can also help you find, and apply, for various financial assistance programs for your loan. Consider selling your home. If your income drop is permanent or very long term in nature, it might be smarter to sell. Of course, selling your house may provide the money you need to pay off your current mortgage in full if you are behind. But check the balance due on the mortgage and compare that to the total value of the home to determine if there is any equity in it. Bankruptcy filings can be considered. As the very last resort, personal bankruptcy an option. This will usually be a last resort because the results are far reaching and long-lasting. A bankruptcy filing will stay on your credit report for multiple years. It will make it difficult, if not impossible, to buy another home, obtain credit, may impact future job opportunities and in some cases, prevent you from getting a job. Find help with bankruptcy . Consider Chapter 13 bankruptcy . If you have a regular income stream, Chapter 13 may allow you to keep property, like a car or mortgaged home, that you may otherwise lose. This is yet one more options to consider when all other resources have been explored. In a Chapter 13 bankruptcy filing, the court will approve a repayment plan that will allow you to use future income to pay your mortgage, but it is limited three-to-five-year period.