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  • 7 Effective Options When You Can’t Afford Your Mortgage Payment

    November 11, 2016 | Blog
  • mortgage payment

    1. Refinance Your Home

    Refinancing your mortgage is the most proactive action you can take to prevent a foreclosure on your house especially when the mortgage interest rate is higher than the prevailing interest rates. However, this option will work best for you if you pursue it early enough before you have defaulted on your mortgage payments.

    In fact, it will give you a chance to restructure your mortgage with the mortgage contractor, recast it to a longer span of time and lower your monthly mortgage payment.

    2. Apply for a Loan Modification For Mortgage Payment

    As soon as you feel that your mortgage payments are becoming unbearable, applying for a loan modification will serve you quite well. A loan modification application will enable you to negotiate for new terms and payment rates with your mortgage contractor.

    It is actually among the course of action you can take because it keeps your credit reputation intact and prevents your house from going into foreclosure. Ideally, a loan modification request will get you a better rate on your mortgage payment and certainly lower your interest rate.

    3. Leverage Reverse Mortgage For Mortgage Payment

    If you have not heard of a reverse mortgage before, it is simply an arrangement with your lender to use the house you are mortgaging as equity to acquire a loan from them. In a reverse mortgage, some payments you have paid for your house is the equity against which you acquire a loan from your lender.

    This loan will be paid out to you on a monthly basis and provide you will the necessarily cash flow to sustain your mortgage payments. However, a reverse mortgage is only available to persons aged 62 years and above. Also, it is subject to insurance and property taxes which you must pay to retain ownership.

    4. Deed in Lieu of Foreclosure

    If you are determined to forego your house during a financial hardship, a deed in lieu of foreclosure could work for you. A deed in lieu of foreclosure is a voluntary transfer of your property’s title deed to the mortgage service; with an agreement from them in return of cancellation of the remainder of your debt in mortgage payment arrears.

    You will be able to cancel your mortgage without significantly damaging your credit. However, you should be aware that all the equity you have in the house is lost and your tax liabilities could get complicated in case you have other loans on the house.

    5. Short Sale For Mortgage Payment

    Putting your house on a short sale is a quick and smart way to avoid defaulting on your mortgage when you are short on cash flow. A short sale allows you to sell your house for less than its actual value, but your lender must agree to take that amount to settle your loan.

    It is quite a procedural and time-consuming process, but once you are in agreement with your lender-a short sale will serve as a full loan payoff for you to walk debt free. Also, it does not damage your credit, and you can qualify for prime financing in as soon as 2 or 4 years after the short sale.

    6. Sell or Rent Your Property

    Selling your house is an effective way to stop your property from going into foreclosure. Your lenders are likely to postpone foreclosure proceedings if you have an ongoing sales contract. It will work best if the revenue from the sale is adequate to pay off the arrears on your mortgage. Such a sale will save you legal fees and protect your credit rating.

    Most importantly, your equity in the property will be shielded from a foreclosure. Renting out your property is also another way you can raise money to pay your mortgage while you live elsewhere at a cost lower than the rent proceeds from your house. Renting your property can work out well for you until your finances are adequate to pay the mortgage.

    7. Declare Bankruptcy

    Most people consider filing bankruptcy as a last result, but this must not be the case when you cannot afford to pay for your mortgage. Although it is an immense decision, it a good move for you as a homeowner if you do it early before your finances are severely affected by the mortgage.

    Declaring bankruptcy allows you to restructure your debts and it can be quite effective with the guidance of a good lawyer. It offers you a fresh start and opens a new prime mortgage financing to you in less than two years although it will remain on your credit report for ten years.