Your mortgage is arguably the most important monthly expense that you have. The house that you live in serves as the collateral for that loan, which means that if you fall behind, your home ownership status is at risk.
Once you fall behind, your mortgage company will likely notify you of a late payment and assess a late fee. If you miss multiple payments or if a company has strict internal policies, you might receive a warning letter after only one missed payment.
When the mortgage company cannot trust that you will continue to make payments, they may initiate foreclosure proceedings that allow them to take your home from you. How should you handle falling behind on your mortgage payments if you want to protect your home?
Review your budget carefully
What bills and expenses have taken priority over your mortgage? Do you have a credit card that is over is the limit and at-risk resulting in a lawsuit? Did you have unexpected expenses, like medical bills, in recent months that have led to falling behind on payments? Is your income lower than usual because of a job loss or layoff?
Once you make a late payment or fail to make a payment, you need to look at how to get back on top of your mortgage as soon as possible. Evaluating your budget to remove unnecessary expenses or prioritize the most important that can help you avoid falling further behind.
Reach out to your mortgage lender for support
Foreclosure is expensive on its own, and lenders often take a double hit because foreclosed homes typically won’t command as good of a price on the open market as other properties. Your mortgage company, in other words, has an incentive to work with you.
They may agree to defer the late payments and move them to the end of the loan’s repayment. They might agree to restructure the loan to reduce your payments or otherwise help you catch up. If they won’t work with you, you may need to look at more aggressive solutions for your financial issues.
Bankruptcy can help get rid of other debts or give you leverage for negotiations
A successful personal bankruptcy filing will eliminate your unsecured debts, like medical bills and credit card balances. You will then have that much more money in your monthly budget to allocate to your mortgage and other major expenses.
Depending on what kind of bankruptcy you file, it may also give you a lender additional incentive to work with you about restructuring your loan. If your lender has already initiated foreclosure proceedings, a bankruptcy filing can temporarily hold them and give you a chance to negotiate or catch up on payments.
Rather than putting your home ownership at risk, when you fall behind on your mortgage, it’s important to start looking for help as soon as possible.