Falling behind on a conventional mortgage payment can be scary for a homeowner. If you've recently missed one or two payments, there are many things you can do to get back on track with your mortgage lender. Understanding why you're in default and knowing your options can help you decide how to proceed.
Identify Why You're Not Able to Make Your Payments
Before a homeowner can start to get back on track with their bank, it's important for them to understand why they're having a hard time making a payment. Sometimes the reason is obvious, like loss of a job or death in the family. Other times, the reason is not very clear.
Sometimes problems happen gradually when a homeowner takes on too much credit card debt, too many other debts, and too many expenses. Tracking prices and payments over time can help homeowners understand why they're unable to pay their mortgage.
Work With Your Lender
Many lenders have different tools to help homeowners who are unable to make their mortgage payments. It's important to remember that lenders do not want homeowners to default on their payments, because if they do, the lender must then take over the property and try to sell it to someone else. This costs the lender money, and the process is never easy. Below are some options that lenders may offer to homeowners in trouble.
Some lenders offer a one-time skip-a-payment option for people who are unable to make their mortgage payment. This one-time-only option allows the homeowner to skip the payment, although they may have to pay fees. The homeowner must also pay interest on the loan. The interest is added to the balance, which causes the overall total amount due to grow.
Homeowners who skip a single payment and who aren't offered the skip-a-payment option by their lender may find themselves in a "rolling late" cycle. The rolling late cycle occurs when the homeowner skips a payment in month A, then pays their mortgage on time in month B.
However, because they skipped month A's payment, the homeowner is still considered late on their payment, because the payment made in month B was applied to month A. Until the homeowner makes up their payment, the payment made in subsequent months will always be considered "late." This can have an impact on the homeowner's credit score and can also be a very difficult cycle to break.
Consider a Major Change
Sometimes when a home becomes too expensive, it's up to the homeowner to make a change. For many homeowners, just admitting this time has arrived can be very difficult. However, missing one mortgage payment is often a sign that the homeowner can no longer afford to live on the property.
It's often easier to sell the home in the early stages of financial trouble, rather than the later stages. In the later stages of financial trouble, a homeowner may let maintenance fall behind, and the home may become less desirable to buyers. In addition, many homeowners who fall behind on one payment will soon find themselves falling behind on another and another, which just adds to the stress of trying to maintain a home.
Sometimes homeowners are able to relieve their financial distress by turning a portion of their home into a rental property. Renting out extra space above the garage or in a basement apartment can help homeowners supplement their income without moving.
A homeowner who misses repeated mortgage payments and who is unable to pay it back to their lender may face foreclosure on their home. Foreclosure is what happens when a homeowner misses too many payments and the bank reclaims the property.
Foreclosure can be a long and time-consuming process, and in that time, the homeowner will have many opportunities to pay back their mortgage to get current with their lender. However, doing this becomes more difficult as administrative fees begin to pile on.
Contact Your Lender if You Need Help
If you're a Joe Rich homeowner who is current with your payments but you're concerned that you could fall behind sometime soon, contact your lender. Your lender may be able to refinance your loan or work with you in some other way to ensure that you're able to stay current with your loan. Once you've fallen behind, it can be very hard to get out of a hole.
If you've already missed one payment, work with your lender to find a way to resolve your situation. Your lender may be able to suggest options that could help you get back on track. Contact your lender as soon as possible to reach a resolution.