Falling behind on your mortgage payments can be stressful. Many homeowners have trouble making ends meet because of injury, job loss and other unexpected circumstances.
In this situation, you can take steps to avoid foreclosure and protect your home.
Communicate with your lender
Reach out to your mortgage company as soon as you realize you are falling behind on payments. Lenders may be willing to work with you to find a solution. Discuss your financial situation openly so they can help you explore possible alternatives to foreclosure.
Review your mortgage terms
Familiarize yourself with the terms of your mortgage agreement. Understand the interest rate, payment schedule and any grace periods or late fees. This knowledge will help you make informed decisions about your payments.
Explore loan modification or refinance
In some cases, lenders may be willing to modify your loan to make it more affordable. They may extend the loan term, reduce the interest rate or add missed payments to the end of the loan. Loan modification might help lower your monthly payments and make them more manageable.
Refinancing your mortgage to secure a lower interest rate or extend the loan term can make your monthly payments more affordable. However, you need to have good credit to qualify, and you must pay fees and closing costs associated with the new loan.
Consider forbearance
Forbearance is a temporary suspension or reduction of your mortgage payments. If you face a short-term financial hardship, such as a job loss or medical emergency, this solution may provide temporary relief while you work to regain financial stability.
Create a repayment plan
Work with your lender to create a repayment plan if you can afford to resume regular payments but need some time to catch up on missed payments. A repayment plan allows you to gradually pay off your past-due amount while maintaining your regular mortgage payments.
Seek financial counseling
Non-profit credit counseling agencies offer free or low-cost financial counseling services. A housing counselor can help you assess your financial situation, create a budget and explore options for avoiding foreclosure.
If you cannot keep up with mortgage payments, selling your home voluntarily may be a better alternative than foreclosure. Selling the property can help you pay off the mortgage and potentially salvage your credit rating.
Filing for bankruptcy may also help you keep your home. Personal bankruptcy cases rose 9.5% from June 2021 to June 2022 according to data from U.S. Courts. If you find yourself in this situation, you can potentially claim a homestead exemption and reduce your other debt to catch up on your mortgage.
