Financial difficulties can happen to even the most responsible and disciplined people. This is just a fact of life and nothing to be embarrassed about. Therefore if you run into money troubles that interfere with your ability to make your mortgage payments, the first thing that you need to do is to call your lending institution and tell them about your situation. Contrary to what many people think, mortgage lenders don’t benefit by foreclosing on your house and taking it away from you. Doing so actually costs them more money than they can make off of an auction and is a far worse proposition for them then letting you pay off your loan if you are at all able. Also, lenders are required to work with borrowers in order to find ways to work around financial difficulties and provide a solution to financial troubles.
The reason why calling your lending institution is the first thing that you should do when you run into financial difficulty is because the earlier you seek help the options you’ll have that may save your house. After you’ve contacted the lender, it’s a good idea to contact a housing counseling agency. A counselor from one of these outfits will help you stand up for your right and negotiate with your lender on your behalf for a viable solution to your problem, at little or no fee to you.
The options that a counselor might be able to come up with when talking to your lender depend on the nature of your financial difficulties. Particularly whether the source of the problem is temporary or something that’s likely to be a permanent problem. For example, if you got into an accident and can’t work for a few months while you heal, your troubles could be considered temporary. But if the accident left you disabled, then a long term solution would be in order.
Temporary solutions to an inability to make your mortgage payments include reinstatement which is an agreement between you and the lender to pay back whatever you haven’t been able to pay at some point in the future. Another, forebearance, is a suspension of payments with the understanding that you’ll be able to catch up on the payments later. A repayment plan is often used with these solutions so that you can pay your back payments over an extended period of time with slightly larger monthly payments when they start up again.
Solutions to longer term financial problems include modifying the mortgage agreement to make the monthly payments lower. This can be done by lowering your interest rate, extending the term of your mortgage , and in rare cases even forgiving some portion of your debt. Another popular option is refinancing the mortgage so that another institution takes over your mortgage on terms that are better for you and then pays off the debt to the original lender. If all else fails you may be able to get your payments forgiven or lessened while trying to sell your house.
One thing that should be emphasized is that lenders will be more likely to work with you if you’re making a real effort to come up with the money for payments. Even if you can’t scrape together enough money to actually make payments, you can earn credibility with lenders by eliminating unnecessary expenses and selling off assets. Examples of unnecessary expenses include cable TV, eating out, and the expenses associated with a second car. Assets that can be sold include extra cars and boats, and jewelry.
With patience, discipline, and foresight you should be able to avoid the gut wrenching experience of losing your home in even if you fall on hard times.