Facing Mortgage Payment Challenges? Here’s What You Need to Know

No sooner do you get up than you read an email from your mortgage provider that you have missed the payment and that you will face consequences if dues are not cleared soon. Such emails can be worrisome. The risk is too high if you fail to meet your obligation: you can lose your house. Reading the same email on and off with a frown on your face will not let up your problem.

It is vital to inform your lender of your true financial situation before it is too late. Failure to make payments will result in:

  • Repossession of your house
  • Lower credit points
  • Heavy interest penalties and late payment fees

A missed payment can have a negative impact on your overall finances, and therefore, it is crucial to talk to your lender immediately.

Mortgage lenders wait until two weeks to write to you when a payment is missed, but you do not have to wait for it to seek help. Here is how lenders can help.

If your income has dropped or you have lost your job If you cannot pay back a second mortgage
 

You will have to inform your lender of the true reason for being unable to repay the mortgage. They will reassess your financial situation before letting you know what options they have to offer you.

 

You should talk to an experienced debt advisor. You can get independent financial advice from Citizens Advice Bureau. Get into action before it is too late.

What options can a lender offer you?

Lenders can offer you a couple of options depending on your financial situation. They are supposed to treat you fairly. Should you find that they do not take your concerns seriously, you can file a complaint to the FCA. The options they can offer you are as follows:

  • Change your repayment plan

Based on your current financial circumstances, they will change your repayment plan. They may change the due date or reduce the payment size.

  • Payment holiday

If your financial condition is too bad, they will offer you a payment holiday. It lasts only a month or two, and then you have to start making payments as scheduled. Interest will accrue for that period. This option is suitable when you are unable to clear your dues due to the job loss.

  • Change to interest-only options

Your mortgage payments would have been amortized so far. Your lender can ask you to make payments towards interest only unless you bounce back.

  • Forbearance

Forbearance is the suspension of your mortgage payments for a fixed period of time. It typically does not extend payments more than 12 months. Unlike payment holidays, forbearance gives you relief from payments for a particular time period. It will prevent you from foreclosure.

However, bear in mind you will have to make the suspended payment in a lump sum or a new repayment plan. Forbearance is a good option to consider when you have other debts like no denial installment loans from direct lenders only to pay off. You will get some breathing space to manage those small debts.

  • Refinancing

You should talk to your lender to avail yourself of lower interest rates, which is possible with refinancing your current mortgage. You will have to meet the following two conditions to get the nod for lower interest rates:

  • Your credit score should be good at the time of refinancing.
  • You must have built at least 20% of equity in your house.

The refinancing process can take a couple of weeks. Make sure you apply for it before you miss any payment. Otherwise, your chances of approval will be lower. Since your lender will “take stock of” your overall financial condition, make sure you do not have any other obligations like a $10000 loan with guaranteed approval and no credit check online.

  • Sell your house

You can sell your house to pay off your mortgage once and for all if the market value is more than what you owe. A house in good condition is quickly sold. You may have an emotional connection with your house and might not want to sell it, but selling is a financially wiser move than paying off interest penalties due to non-payment. Keep in mind that any missed payments on your current mortgage can halt the process of your refinancing application. Make sure you keep up with all payments on time.

  • Renting out of your house

You can rent out your house and go to your parent’s house and stay there until your financial situation recovers. The monthly rent you collect can be put towards your mortgage payments. Before you make this decision, you will need to ensure that you are not about to be a burden on your parents. Becoming a landlord will bring in additional responsibilities such as:

  • Your property insurance costs will increase.
  • You will be financially responsible for home maintenance and repairs.

Remember that if your house goes into foreclosure after renting it out, your tenants have valid grounds to take you to court.

  • Short sale

A short sale should be the last resort. If nothing works, your lender may let you put your house on sale to accept the sale amount for the mortgage settlement. A short sale will also appear on your credit file and negatively affect your credit points. However, it does less damage to credit rating than foreclosure.

  • Find out what you can do on your own

A mortgage lender is supposed to help you when you are in a tight spot and having difficulty paying off your mortgage. But it does not insinuate that you should completely rely on their options. Work on your budget. Figure out how much you can actually pay.

  • Sometimes, making a minimum payment can be a better alternative.
  • Reduce your spending. Try to live off a bare-bone budget that only includes essential expenses.
  • Avoid using your credit card so as not to fall into debt further.
  • Check if you can increase your income.

The bottom line

It can be difficult to make mortgage payments when your financial situation is turned upside down, but there are many ways to deal with this problem. First, you should work on your budget. If that is not enough, you should talk to your lender to know how they can help you. Make sure you are quick to take action because missed payments can have negative consequences.