No matter how low the mortgage rates are when you take out a home loan, unforeseen financial changes can make keeping up with your payments an obstacle. Our lives are not static, and something as innocuous as a plumbing bill or abrupt as an emergency car repair can make staying current with a monthly mortgage payment difficult. Fortunately, there are a number of strategies to deal with mortgage payment difficulties.
The first thing a borrower should do if they find themselves facing financial trouble is speak to their lender. Mortgage lenders want to keep their investment safe, and they will work with a borrower to manage whatever financial difficulty has arisen. By being proactive and getting in touch with your lender at the first sign of trouble, you can begin exploring options and receiving help before things get out of hand.
However, speaking with your mortgage professional is only part of the bargain. It’s essential that borrowers have a clear picture of their financial situation and are able to express it to their lender. A one-time shortfall of funds due to an unforeseen expense is a lot different from something potentially long-term, such as losing a job or taking on major medical bills. When you speak to your lender, make sure that all financial obligations are accounted for, including bills, other loans and credit card debt. Mortgage professionals can’t help you unless they have all the information necessary to make an informed decision.
There are several actions a borrower can take to help manage their mortgage payments and stay up to date with their payment obligations.
If a borrower has an adjustable-rate mortgage, they may be able to convert it into a fixed-rate mortgage. This will help protect borrowers from sudden interest rate increases. Unlike adjustable-rate mortgages, fixed-rate home loans keep interest payments steady for the entire lifespan of a mortgage.
An amortization period is how long a borrower has to pay off their mortgage debt. Shorter amortization periods mean larger payments, so extending an amortization period could help borrowers who are having trouble keeping up with their monthly bills.
Lenders may be able to offer more flexible payment schedules to struggling borrowers, especially if they’ve shown themselves to be financially responsible in the past. Lenders will likely be even more accommodating if borrowers have made lump sum payments or accelerated payments in the past. This could even translate into a short-term deferral for new payments due to the advanced amount already paid toward a mortgage balance. Additionally, lenders may be willing to roll missed payments into the overall loan amount, spreading out the cost for borrowers.
Mortgage modification is the process of changing the terms of a loan without refinancing. Home loan modification is usually intended to lower monthly payments, giving homeowners struggling to stay up to date a chance to remain current.
Mortgage refinancing is the process of replacing an older loan with a new one featuring better terms. This is particularly popular when mortgage rates are low, allowing borrowers to lock in a lower interest rate and decrease the amount of their overall payments.
No matter what type of strategy you use to deal with mortgage payment difficulties, the most important thing is to act quickly. Falling behind on your payments can lead to severe damage on your credit history, as well as the possibility of foreclosure. Speak with your lender to find a solution that fits your needs.