The average person who obtains a mortgage to purchase a home intends to do everything in their power to make the payments on the property. After all, the house where someone lives is the collateral property for that mortgage, which means that missed payments can cost someone their place to live.
Yet, despite the best intentions a homeowner may have and their concern about years of equity that could be at risk, sometimes factors outside of an individual’s control mean that someone misses payments. Missing a payment or two can be enough to make people feel incredibly anxious, as they do not want to lose the home where they live and the money that they have invested in it thus far. Thankfully, most homeowners are granted some grace by their lenders before they’re at real risk of foreclosure.
Most people have several months to catch back up
Owing multiple mortgage payments at once can seem like a major financial hardship, particularly if someone currently has a reduced level of income compared to when they initially qualified for the mortgage. Provided that the property is someone’s primary residence and that their mortgage is standard one, missing a single payment won’t put a homeowner at risk of foreclosure.
So long as someone returns to work or rebalances their budget, falling behind by one month or even two won’t usually be enough to affect their ownership interest. However, if someone has missed four months of mortgage payments and has not made any significant effort to catch up, their lender might then initiate foreclosure proceedings.
In some cases, individuals can communicate with their lenders and work out arrangements that allow them to retain the property while correcting their financial circumstances. For example, sometimes they can extend the number of years they will make payments on the mortgage to reduce the monthly amount due.
When lenders are not initially receptive to such efforts, sometimes property owners decide that their best option might involve filing for bankruptcy. Bankruptcy proceedings can temporarily halt foreclosure and other aggressive collection efforts. During a Chapter 13 bankruptcy, in particular, individuals may have an easier time negotiating with a mortgage lender and securing concessions related to their repayment schedule and other details related to their mortgage. This type of bankruptcy also allows homeowners ample time to catch up on overdue balances.
Understanding how quickly missed mortgage payments might lead to foreclosure may help some property owners better respond to recent financial challenges in informed ways.