The Daily Vanguard

What To Do If You Can’t Make Your Mortgage Payment

Foreclosure is a very unpleasant thought. But many of the homeowners find themselves at risk of losing their credit and home based on this very reason. Here are a few of the major choices you can avail before it’s too late:

Refinance:

In essence refinancing means that you take on a new loan to pay off your current one. Refinancing is, as its names suggests, modifying your current loan. Let’s go ahead and put this definition in a scenario and see how it could be benefit a consumer. Let’s consider your mortgage interest rate is higher than today’s rates, refinancing your mortgage could lower your monthly payment enough for it to be affordable. But it’s vital that borrowers pursue this option before missing payments.

“Lenders would much prefer to work with you, and a clean refinance is easiest on everybody, and most profitable for them”

-Says Casey Fleming, author of The Loan Guide.

Extend your Loan Term:

A longer loan term usually goes hand-in-hand with a reduction in interest rates and as an additional benefit it can also help in reduce the cost of your instalments.

Overall, you may end up paying more for the total cost of your home with a modification or refinance. But if you’re in need of a short-term solution, a longer loan-term plan might be an option for you.

Short Sale:

The term basically means that you will be selling your house for less than the amount you owe to your mortgage, but, more importantly it means that your lender agrees to consider this deed as the amount of unfulfilled payoff of your loan. Furthermore, it is important to mention here that this deed is much easier on your credit than a foreclosure. However, the process spans over quite a few months and it requires diligence and patience. Naturally, this process also starts with contacting your lender and it manages showcase that you are willing to work with your lender. Many industry experts and leading real estate brokers like Spring Hill Realty, also predict that people opting for this option could qualify for prime financing again within two-to-four years after a short-sale is complete.

Complete a Deed In lieu of Foreclosure:

With a deed, in lieu of foreclosure, your lender agrees to cancel your mortgage debt in return for the volunteer transfer of the deed of your home to them. You’ll have to request an application to see if you’re approved for this option. According to legal experts, you will likely have to provide:

• A financial statement detailing monthly income and expenses.

• Proof of income.

• Recent tax returns.

• Bank statements.

• A hardship letter.

Reverse Mortgage:

With a reverse mortgage, the lender pays you a monthly amount instead of you paying them. This is a loan against the equity you hold in your home. More importantly, a reverse mortgage is only available to those above ages 62 and older. There are a few factors to consider, if you decide to go with this option.

• You will still pay property taxes and insurance, and be required to maintain your home.

• According to the FTC, there are fees and costs involved to set it up, and interest accrues on the amount you receive.

Sell or Rent your Home:

Depending on the market where you live, it is a possible avenue that you could sell your house and pay the mortgage in full, but sadly this option is not always possible. Some home owners facing foreclosure instead turn to short-sale as it presents some positive aspect to regain something valuable.

As mentioned earlier, you sell your home for less in a short-sale than the amount owed on your mortgage. The lender agrees to accept this amount due to your financial hardship. But it will affect your credit report. However, the repercussions may not be as bad as a foreclosure.

Another option in this sort of situation is renting out your home. A report by Spring Hill Rentals reveal that not a lot of people will consider it in the first place, but the long-term benefit of meeting your mortgage instalments can be a lot easier if you could add another revenue source to your contributions. Of course, this is a complicated endeavour. But if you think it can save you from foreclosure, it might be worth pursuing.