Whether it’s a job loss, unexpected medical bills, or something else, financial hardships can happen to anyone. If you’ve hit hard times and fallen behind on your mortgage, the most important thing to know is that there is hope. As long as you’re willing to talk to your lender, there are plenty of options available to help you avoid foreclosure. We’ve laid them out for you below. Keep reading to learn what you can do to get out from underwater.
Call your lender
If you get behind on your mortgage – or sense that you may have financial trouble in the near future – your very first step should be to call your lender. Foreclosure is an expensive process, so most lenders will be willing to work with you if it means they can avoid spending the money. There are two common methods that they use to help you get caught up on your payments.
Repayment plan
The first method is known as a repayment plan. This is a good option if you’ve gone through a temporary financial setback like a job loss, but it’s come to an end. With a repayment plan, the amount that you’ve accrued in missed mortgage payments is split over a set number of months and added to your existing mortgage payment.
Reinstatement and forbearance
With reinstatement and forbearance, your lender agrees to temporarily suspend or reduce your mortgage payments for a certain period of time. At the end of that time period, you’ll be expected to make up for all of your missed mortgage payments with one lump-sum payment. Again, it’s an option that works best if you’re confident that your financial hardship will be resolved by the time your repayment is due.
Change the terms of your mortgage
If you feel that keeping up with your mortgage payments may be an ongoing issue, changing the terms of your mortgage may be a better bet. Again, there are a few different ways to make this happen.
Mortgage modification
Sometimes your lender will agree to modify the terms of your existing mortgage. In this case, you’ll either be given a better interest rate or the lender will extend the length of your mortgage in order to lower your overall monthly payment.
Refinancing
If your lender isn’t willing to adjust the terms of your current mortgage, refinancing might be your best bet. When you refinance, you take out a new loan – one that ends up in a more suitable monthly payment – and use the proceeds to pay off your existing mortgage.
Talk to a HUD-approved counselor
Keep in mind that you don’t have to go through this process alone. If you would like more guidance than your lender can provide, you may want to talk to a HUD-approved housing counselor. They can help you walk through your options and decide which one is the best bet for you. Often, they will offer their services for free or at a low cost.
However, if you choose to go this route, make sure to do your research before you commit to working with a specific counselor. As we said above, you’ll want to choose someone who is HUD-approved. Unfortunately, there are foreclosure prevention scams that you need to watch out for. Be wary of anyone who seems to want to charge you an exorbitant amount in exchange for their services.
Sell your home
If all else fails and you don’t see another way to get caught up on your mortgage, you also have the option of selling your home. Many homeowners in this situation will choose to do a short sale, where the lender agrees to sell the home for less than the amount that you owe in order to avoid foreclosure. Again, you’ll still need to talk to your lender before you can go through with this option.