Your mortgage is arguably the most important monthly bill that you pay. Contributions each month help reduce the total balance owed and increase your overall equity in the property. After multiple decades of payments, you will own the property outright. Your home may be the biggest item you’ve ever purchased and a major contribution to your total personal wealth.
Unfortunately, anytime up until your last payment on your 30-year mortgage, you could lose the investment you have made in your home. When you miss payments, the lender can lay claim to your home, which is the collateral property for the loan used to purchase the home. What happens after you miss a mortgage payment?
Your lender must notify you
Mortgage companies are subject to strict regulations especially when it comes to reporting late payments and foreclosure proceedings. Your mortgage company should let you know right away when your mortgage payment is late. They should then advise you when they intend to escalate collection efforts.
Typically, a mortgage lender can initiate foreclosure proceedings when you have a payment that is at least 90 days past due. The more payments you miss and the longer you delay paying them, the greater the chance of aggressive action by the lender.
You have the chance to redeem the property
At some point, when the lender takes you to court, you will have more of an uphill battle protecting your ownership interest. You may reach a point where redemption or paying off the full balance of the loan is the only option.
Still, it is often possible to negotiate alternate terms, such as moving the missed payments to the end of the loan. Professional help with negotiations may increase your chances of securing such terms. You may also need to consider bankruptcy if you don’t believe you can catch up on payments before the lender attempts to foreclose on the property.
When you file for bankruptcy, you temporarily stop foreclosure efforts and other collection activity. Especially if you file for Chapter 13 bankruptcy, you also give your lender a powerful incentive to cooperate with you when you ask for a modification of the existing mortgage. Taking action when you fall behind on your mortgage rather than when your lender takes extreme steps to collect on a debt will help you protect your investment in the property.