What Can Happen When I Pay My Mortgage Late?

Late on Mortgage

When you find yourself having difficulty paying your mortgage payment on time, the first thing you need to do is contact your lender. Staying in contact with your lender throughout your hardship is essential to working with the lender to come to a resolution.

There are numerous government-sponsored programs that are available to homeowners that find themselves in a situation that causes them to be late on their payments or if they have difficulty paying at all. 

Here we would like to share with you the steps you can take to keep your mortgage in good standing, provide resources and advice on how to avoid foreclosure. 

Who Should I Call if I know I will be Late on My Payment?

Be sure to know your due date on your mortgage. You can do this by checking your monthly mortgage statement. Your statement will also display how much a late fee you will pay with a late payment. 

It is understandable that life’s challenges can cause financial hardship. From divorce, a loss in job, a pay cut, or medical expenses to major life changes, these are all factors that can change a person’s financial status greatly. You should contact your lender immediately, so they know you are working to repair any issues with late payments. If your lender contacts you first, be sure to answer the phone and cooperate so you can avoid foreclosure. It’s essential to remember that if you don’t explain your situation, your lender cannot help you. 

Writing a letter to your lender is a great way to explain your situation and keep records of your documentation that you are trying to work with them. Explain why your hardship is preventing you from making your payments on time or why you can only afford a partial payment. Your lender will display addresses on their website or your monthly statement as to where any kind of correspondence about hardships should be mailed. If you cannot find an address, call your lender and they can provide to you over the phone. 

The best advice: do not delay in seeking assistance. The foreclosure process can begin as early as 90 days after your first missed payment. A foreclosure hurts your credit and can have long-lasting effects of up to seven years. It is difficult to come back from a foreclosure. 

How Can My Lender Help Me During My Hardship?

Help with Mortgage Payment

 

Your lender has several options and ways that they can help you through your financial hardship. In many cases, the lender would rather you keep your home saving them from foreclosure costs. Most lenders will use foreclosure as a last resort, so they are willing to work with you. 

Pre-Foreclosure Sale: If your market value on your home is lower than what you owe on your mortgage, it might be possible to list your home for sale and negotiate a lower mortgage payoff. This process is called a short sale. Essentially, your home is listed for a fair market value and the lender will accept less than what they are owed to pay off your loan in full. There is a lot of paperwork with the process, however, most lenders have packages that list everything you need to do to work through this process. Be sure to talk to a tax consultant if you opt for a short sale, as there may be tax liabilities associated with the debt the bank is forgiving. 

Forbearance: If your financial hardship is temporary, you and your lender may be able to work out a repayment plan. The goal of the repayment plan is to help you get caught up on already missed payments and get you back on track for future payments. You will need to show proof of your hardship and also layout a monthly budget for the lender to review and approve you for a forbearance plan to avoid foreclosure. 

Loan Modification: If you have a change in monthly income that is significantly lower effecting your ability to pay your mortgage payment, contact the lender as soon as possible. Instead of going into default, the lender may be able to offer you a loan modification. The modification can lower your interest rate, extend the duration of your loan, and/or add your delinquent amount due onto the principal. Over time, you will end up paying more money for your mortgage, but your monthly payments would be more manageable. 

Partial Claim: Your lender may be able to help you qualify for an interest-free loan from the Secretary of Housing and Urban Development (HUD). This loan assists homeowners with the delinquent amount due making your mortgage current. However, the following factors must apply in this situation:

  • You are four or more months delinquent
  • You are not yet in foreclosure
  • You are able to and ready to make full payments again

Deed in Lieu of Foreclosure: If there are no options above noted that will work for you, you can decide to deed the property back to the lender. In the end, you will lose your home, but you will have less damage to your credit score. 

What Are Common Situations That May Lead to Foreclosure?

Second Mortgage Foreclosure

There are several commonalities when it comes to homeowners that find themselves in foreclosure. If you are experiencing any of the following situations, you may want to head the issues off at the pass and look for an early solution or contact your lender right away. 

Financial Warning Signs

  • You live paycheck to paycheck
  • You are not sure how much debt you owe
  • You have paid late fees at least twice within the last year
  • You owe more than 20% of your pre-tax income to other debts
  • You have received debt collector phone calls for past due debts more than once in the last six months
  • You struggle to pay the minimum amount due on your credit cards each month
  • You could not afford your monthly debts or expenses for three months if a major financial crisis occurred
  • You have money problems that cause you stress
  • You are at or near your credit limits
  • You have borrowed from one credit card to help pay off others
  • You have taken a cash advance on a credit card to pay off a debt

If you experience five or more of these warning signs, you may be closer to financial troubles than you think. You need to reconsider your financial strategy and set up a budget that is affordable and coincides with your monthly income. When you make payments on your debt, you want to be sure you are paying off more than the minimum each month. That way more of your money goes to the principal balance of your debt. You can also contact your creditors to try to get lower interest rates, suspended fees or a payment arrangement. 

Who Can I Contact for Assistance?

Financial difficulties can be stressful. You definitely want to avoid foreclosure. In the end if your resale value is lower than the amount you still owe, the lender can come after you and collect the difference by filing a deficiency judgment. A foreclosure can have long-lasting and damaging effects to your credit report for up to seven years. 

There are many organizations that can help you during a financial crisis. There is no need to go it alone. You can find help by taking these steps: 

  • Contact a debt solutions company
  • If you have a VA loan and have troubles making your payments, you can go the U.S. Department of Veterans Affairs website at www.benefits.va.gov for more information.
  • You can go to the U.S. Department of Housing and Urban Development’s website at www.hud.gov to explore programs available to you. 

Remember, when you are experiencing a financial hardship you may be a target for scams. Avoid paying people who claim to be specialists and they can help you avoid foreclosure. Scam artists will often present solutions in the following ways:

  • Sign this paper and I will pay your past due amount on your mortgage. In some cases, the paper you are signing is a deed granting them ownership of your property. You end up losing your home and you are still responsible for the unpaid mortgage balance. (Common scam!)
  • Sign this paper and I can obtain a new loan for you. You are actually signing a deed that has a higher interest rate with the loan that comes with it. In this scenario, you lose your home and you now have a second mortgage while still owing on the first.  (Common scam!)
  • I’ll rent your house and pay your monthly mortgage direct to the lender. This can lead to the scammer not paying your mortgage, you lose the home, end up in foreclosure and may need to file bankruptcy to find relief from the debt.  (Common scam!)

If you are in a financial hardship situation, you can avoid making your situation worse by:

  • Keeping in contact with your lender
  • Keep your lender informed of your intentions
  • Be sure your lender will release you from liability from your debt before you make any final decisions
  • Be wary of people of offer to help you in exchange for money

Whatever you decide in the end is best for you, be sure to talk to your lender and ensure they will release you from any forgiven debt and never abandon your home. 

It is always best to seek out help before your situation has gone too far. Our company is a cash home buying solutions company that is accredited with the Better Business Bureau. If you need help determining your best outcome, we are here to help you navigate your options. 

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