Paying your mortgage on time is an essential part of good financial management, as late payments will have a negative impact on your credit score. They will also incur a late payment charge from the mortgage provider. For many though a late payment is more than just a temporary slip, but an indication that the mortgage is becoming unaffordable. A simple interest rate rise or a struggle to keep on top of the finances can soon become an issue which threatens the loss of your home.
Many people don’t address the problem when struggling to maintain their mortgage payments. However those who contact their lender early may be able to negotiate and come to an arrangement over payments. This is particularly important for anyone who has acquired equity in their home and stands to lose far more than just the home if foreclosed on, but also the built up equity in the property, including any initial down payment which was made.
There are a number of options available to borrowers who are prepared to deal with the problem head on, rather than just ignore it as many do. If the problem you are experiencing is a temporary one which means payments won’t be met, then the lender may be amenable to a repayment plan or a reinstatement. With reinstatement a date is agreed upon whereby you promise to pay back the missed payments plus any outstanding fees. Alternatively the lender may agree to a repayment plan where overdue or missed payments are added to the future payments.
The lender may even be willing to discuss a forbearance plan with you, where the mortgage payments are temporarily suspended for an agreed time. When the mortgage payments are resumed you add a portion of the missed payments to the monthly mortgage payment until the outstanding amount is paid back.
Always bear in mind that the mortgage provider will be more willing to assist if you approach them honestly and ask for a solution from the beginning, rather than wait until foreclosure is inevitable after ignoring their attempts to contact you.
Many people have simply walked away from their mortgage debt, but this will result in the foreclosure being recorded on their credit file for ten years, making it difficult to obtain any future credit or mortgage. In some states the banks have the legal right to pursue the home owner for any shortfall in the amount owed to the bank, plus fees, once the property has been sold off at auction.
If a late payment is the first sign that your mortgage debt is getting out of control then approach your lender for assistance. Ignoring the problem could you find you homeless within six months.