Late mortgage payments can cause you a lot of stress, aggravation and worry. You may find yourself fielding calls from an irate bank or mortgage lender. Depending on how late you are in your payments, you may even be receiving warnings that the bank will foreclose if you don't take steps to come current on your mortgage payments. When this happens to you, you need to find out what steps you can take to avoid foreclosure.
Avoiding Foreclosure With Late Mortgage Payments
The way in which you will go about avoiding foreclosure depends in large part on your current situation, on whether you want to keep your house, and on how willing the bank is to work with you. Generally, however, you have several options for avoiding foreclosure:
- Get a temporary deferment: If you are only having temporary problems- such as those caused by a job loss or immediate medical problem that will be resolved shortly- this may be the option for you, provided your bank agrees. Essentially, what this means is the bank allows you to temporarily suspend your payments until a specified date
- Loan modification: This occurs when the bank modifies the terms of your existing loan. It became a more popular option after the mortgage crisis of 2008 and 2009 when the government issued incentives to lenders to allow borrowers to change their loan terms. The process of loan modification generally involves changing things such as the interest rate charged or the repayment term to make mortgage payments more affordable. In some cases, the amount owed may even be reduced if the home is worth far less than what is owed on it.
- Refinancing: Refinancing involves taking an entirely new loan and using the proceeds from that new loan to pay off the mortgage you currently have. The new loan generally will have either a lower interest rate, or will have a longer repayment term- either of which will lower your monthly payment and make it more possible for you to pay. To do this, you must have at least some equity in your home and you generally have to have good credit.
- Short Sale: A short sale occurs when you arrange for a buyer to purchase the house, but the buyer's purchase price is less than the total amount that you owe. The bank in a short sale agrees to take this reduced amount and to consider the rest of the loan forgiven, because doing so saves the bank from foreclosing.
- Deed in lieu of foreclosure: When you opt for this choice, you essentially make arrangements to turn the deed of the house over and vacate instead of making them foreclose on you.
Getting Help
If you are concerned because you are behind on your mortgage payments and fear you might be foreclosed on, then you should speak with an experienced foreclosure attorney. He can explain to you any and all options that may be available in your state, given the nature of your situation and the rules set by your lender.
