If you live in a high cost of living area, it can be hard to make ends meet. If you have been living paycheck to paycheck and now cannot pay your mortgage, there are steps that you could follow to find relief. One should first contact their lender as soon as possible about the situation, so they know what’s going on. There are several different ways, and you should go with one after some consultation with a lawyer.
Steps to follow if you struggle with paying your mortgage
Determine if you have enough income to cover your mortgage: Your lender will want to know if you have enough money inflow coming to cover your mortgage payments. This includes all of your household income, so make sure to include everyone who is living with you when calculating this amount. If it looks like you might not be able to make your current monthly payment, contact them as soon as possible.
If you cannot pay your mortgage, you must contact your lender immediately: While you might be upset with your lender, they must be aware of your financial struggle. If they don’t know what’s going on and can’t make contact with you or receive payments from you, this could lead to them starting foreclosure proceedings against you.
Find out if there are any programs in place to reduce the monthly payments or make them more affordable: According to FloridaProbateFirm.com, a Florida probate attorney, “There are many different programs that your lender might be able to put you into to help with the monthly payments. This includes forbearance, loan modification, and even a short sale. Your relatives’ living trust could help you with your mortgage and other debts.’
Apply for a loan modification program: If you cannot make your monthly payments, applying for a loan modification program is one of the best things you can do. This will help reduce your monthly mortgage payment so that it is more affordable for you. Make sure to keep in mind that the process of getting a loan modification can be long and complicated. Be prepared to provide plenty of documentation and answer any questions that your lender might have.
Refinancing: If you cannot get a loan modification or if the monthly payments are still too high for your budget, refinancing might be a good option. This will allow you to take out a new loan with a lower interest rate and be more affordable. Just make sure that you can afford the new payments before signing anything. You can do this if you have a lot of money, but not enough to pay back the old loan. Refinancing might be good for you if your house payments are too high for your financial future and you have no other choice.
Sell property or possessions that have increased in value since you bought them (e.g., stocks): If you cannot meet your monthly house mortgage payments, it might be time to sell some of the things that have increased in value since you bought them. This could include stocks or even other pieces of property like cars or jewelry, or some of your stock portfolio. Selling off these items would help pay off a portion of your mortgage and reduce what needs to be paid back at closing. Although it might make to hold them off for longer, you probably saved them for your rainy days, and this is one of the cases.
Foreclosure: A foreclosure is when a bank takes your house away because you don’t pay the mortgage. The bank can take it back if you don’t make payments or if they want to make more money and sell it to someone else. Foreclosure hurts your credit score, too. If none of the above options work, it might be time to consider a foreclosure. However, this will cause a significant hit on your credit and stay there for several years. Despite that fact, though, you need something that could help right now with making payments or paying off as much as possible.
Short sale: A short sale is when someone sells a house for less than they owe on the total amount. Banks usually let homeowners do this if they can’t pay back all their debts. It might be one way to keep your home and save money, but you could lose thousands in tax breaks or have trouble buying another home after that happens.
Consider Renting Out a Portion of Your Home: If you have extra space, such as a basement or an additional room, consider renting it out. This could provide you with additional income to help cover your mortgage payments. Websites like Airbnb or traditional long-term rentals could be avenues to explore. Ensure that you check local regulations and understand the responsibilities involved in becoming a landlord.
Seek Financial Counseling: Many non-profit organizations offer free or low-cost financial counseling. A counselor can help you understand your financial situation better and work with you to create a budget or debt management plan. They can also negotiate with creditors on your behalf and advise you on the best course of action to avoid foreclosure.
Cut Down on Unnecessary Expenses: Review your monthly budget and identify areas where you can cut back. This might include dining out, subscriptions, or other non-essential expenses. Redirect the money saved from these cuts towards your mortgage payments.
Increase Your Income: Consider taking on a part-time job or freelance work to boost your income temporarily. While this might add to your workload, it can provide the extra cash needed to keep up with mortgage payments during difficult times.
Use Your Savings: If you have an emergency fund or savings, now might be the time to use it. While it can be tough to deplete your savings, avoiding foreclosure is crucial and can save you money and stress in the long run. Ensure you leave enough for other emergencies.
Explore Government Assistance Programs: There are several federal and state programs designed to help homeowners struggling with their mortgage payments. Programs like the Home Affordable Modification Program (HAMP) or the Home Affordable Refinance Program (HARP) could offer you relief. Research the programs available in your area and determine if you qualify.
Bankruptcy: As a last resort, filing for bankruptcy might be an option. This can provide temporary relief from your debt obligations and stop foreclosure proceedings. However, bankruptcy has long-term consequences on your credit score and financial health, so it should be considered only after consulting with a bankruptcy attorney.
Negotiate with Other Creditors: If you have other debts such as credit cards or personal loans, try negotiating with those creditors for lower payments or interest rates. Reducing your other debt obligations can free up more money to pay your mortgage.
Stay Informed: Keep yourself updated on the housing market and any new regulations or assistance programs that might be introduced. Being informed allows you to take advantage of new opportunities that could help you manage your mortgage.
Conclusion
Struggling with mortgage payments can be a daunting and stressful experience. However, there are numerous steps you can take to find relief and avoid foreclosure. The most critical action is to communicate with your lender as soon as you realize you might have trouble making payments. From seeking financial counseling and exploring government assistance programs to cutting unnecessary expenses and considering additional income sources, these steps can provide you with a pathway to manage your mortgage better. Each situation is unique, so it’s important to evaluate all your options and seek professional advice when needed. By taking proactive steps and utilizing available resources, you can navigate through these challenging times and work towards securing your financial stability.
