A few missed mortgage payments can have more severe ramifications than you thought possible. You actually could end up losing your home – the home that you worked so hard towards owning your entire life. Not only that, but it can also ruin your image and social standing since there is a stigma associated with the ‘F’ word, which in turn will make it a lot harder for you to find a new place to rent or land a new job due to your poor credit score following a foreclosure.
Many homeowners can’t resist the temptation to bury their head in the sand, hoping the problem will go away on its own. But this usually turns out to be their biggest mistake. A far better alternative is to try to apprehend your situation well in advance and take some precautionary steps. Here is what you can do to change your situation now and get help:
““My father used to say that it’s never too late to do anything you wanted to do. And he said, ‘You never know what you can accomplish until you try.”
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Keep your lender in the loop
If you are aware of the financial troubles looming in the horizon and feel that you won’t be able to pay installments in the near future, you should immediately contact your lender. They will surely be able to make suggestions and discuss options for moving forward. Letting your lender help you beforehand is far better than trying to find a solution after missing your monthly payments.
Your lender may be willing to help modify your loan. This can be very helpful if you can’t afford the high amount of mortgage installments. They could also extend your mortgage term, so that you can pay lower installments over a longer period of time.
Are you insured?
What if you will miss mortgage installments because you lost a job due to an accident, sudden illness, or the death of a working spouse? First of all, it is important to checkif you are covered by Mortgage Payment Protection Insurance, also called Accident, Sickness and Unemployment insurance. Many homeowners opt for insurance at the time of mortgage approval, but later forget about it entirely. Don’t be one of those people! You should look through your mortgage paperwork and double check with the lender or broker you used when you took out the mortgage to purchase the property.
Can you reduce lifestyle expenses?
Carefully evaluate your spending habits. Cut out unnecessary expenses. This may sound like common sense but it’s the little things that matter in life. Little things add up, they really do.
Do you have recurring direct debits each month such as gym memberships and magazine subscriptions? Did you subscribe to an online service over a year ago that you no longer use? It’s time to cancel these recurring expenses immediately, particularly those that are not providing you with any immediate value in your life. Do you buy coffee every morning or get drinks at the vending machine at your work break? These are everyday expenses that you can put under the category of small, non-essential purchases. Put them in order of priority. Pick the lower priority items first and cut them out one at a time. You can even save money on major property expenses. The trick is to shop around for the best deals on things like homeowners insurance and life insurance.
In addition to cutting your expenses, you could also try to take a part time job for some additional income. The above advice may sound very basic, but given the fact that a financially unstable lifestyle is the root cause of the majority of foreclosure cases, you should definitely try to keep a record of every penny you spend until your finances are back on track.
Take advantage of free counseling
The government works with some counseling agencies in every state in the United States to provide free advice to distressed home owners. These counselors can suggest you some great options like loan modification and specific refinance programs.
Sell your home
If you know that your situation isn’t likely to change in the near future, it’s time to seriously consider selling the home and moving to a less expensive property or finding a way to rent.
You should work towards this option as early as possible, usually even before you find yourself missing mortgage payments. You should begin the process by talking to your lender and explaining your situation to them. Normally, they should be able to suggest ways of helping you solve the problem without having to foreclose on your property (after all, it is often in their best interests to avoid dealing with a lengthy and painful foreclosure proceeding as well!). Typically, they will tend to suggest a short sale or a deed in lieu of sale.
Another fantastic option is to sell to a cash buyer who has the ability to close the deal within a few days. If you sell to a regular buyer, the closing may take a couple of months, but by selling to a cash buyer who has the ability to close fast without any contingencies, you can expedite the transaction and get cash on hand a lot quicker, saving a lot of money on holding costs like monthly expenses and marketing costs for the property.
Conclusion
Missed mortgage payments can land you in a pretty bad situation, but it’s never too late to turn things around. The impact that missed payments have on your life will depend entirely on how you handle the situation. Keep in mind that it's not the end of the world and you do have options. Most important of all, remember that by acting fast, you can get your mortgage payments back on track in no time.
““In a moment of decision, the best thing you can do is the right thing to do, the next best thing is the wrong thing, and the worst thing you can do is nothing.””
Written by Brandon Lor