How to Get Back on Track if You Fall Behind on Your Mortgage
How to Get Back on Track if You Fall Behind on Your Mortgage
It can happen to anyone. You fall behind on your mortgage payments due to the loss of a job, divorce, illness, injury or an unexpected expense. Any of these scenarios can be serious financial setbacks, but with some strategic thinking, can be overcome. Consider these viable options for getting your mortgage payments back on track.
First, Acknowledge It
If your finances have been derailed – even if it’s due to a life-changing event beyond your control – acknowledging your need for financial help is the first step to getting things turned around. Now you can focus on addressing the problem instead of ignoring the obvious and letting the situation spiral out of control further.
Communicate with Your Lender
A little communication goes a long way. Once you start to deal with your circumstances, you should consider talking to your mortgage lender immediately about options for repayment. These can range from a variety of potential solutions, including the following:
Reinstatement
With reinstatement, you pay the total amount you owe in one lump sum payment. (This may follow a forbearance plan as described below.) This allows you to avoid foreclosure by bringing your mortgage current when you have the necessary funds available by a certain future date. This is especially possible if you have funding from a generous benefactor, an inheritance, a tax refund or other money that is coming to you.
Forbearance
In cases of a temporary hardship such as unemployment or illness, a forbearance plan temporarily suspends or reduces the amount of your regular monthly mortgage payment. As the borrower, this allows you to get current with your mortgage balance.
One form of forbearance is a repayment plan. In this scenario, past-due payments are paid together with regular payments over an extended period of time (vs. coming up with one lump sum for the payment) until the mortgage payments are current.
Another forbearance option is a loan modification, which permanently modifies your mortgage to be more affordable or manageable. This can include a lower interest rate, a reduction in the principal balance or a loan extension. A modification can be implemented after successfully making payments during a “trial period” (such as completing a three- or four-month trial period plan) that approximates the modified payment.
Refinancing
If you haven’t thought about refinancing, you might want to start. You could potentially receive a new loan with a lower interest rate or other favorable terms if you are current on your mortgage. The benefit of refinancing when you need mortgage assistance is that it lowers your monthly payment and/or improves your terms.
Short Sale
If your home is worth less than what is owed on your mortgage, you might be able to pay off a portion of your mortgage balance in a short sale (meaning you came up “short” in paying off your lender). However, the lender who holds the mortgage must agree to the decision.
Mortgage Release (Deed-in-Lieu of Foreclosure)
With a mortgage release option, you can transfer the ownership of your property to the lender in exchange for a release from your mortgage loan and payments. This lets you transition out of your home without going through the foreclosure process. In some cases, relocation assistance may be available.
If you’re having a setback with your mortgage, New American Funding may be able to help with mortgage assistance. For more information about any of the options referenced here, contact us today.