Mortgage in Trouble? What are Your Options?
If you’re at risk of mortgage default or are already in default and there’s little hope that you’ll be able to get caught up on payments, you might be wondering what real estate options are available to you.
What Is a Mortgage Loan Default?
When you pay your mortgage payment late, you’re in default. Default is defined as not abiding by the mortgage contract. It could be paying your payment late for one month or more, or it could be not keeping up with taxes or homeowner’s insurance premiums.
Since taxes and insurance are usually taken from your monthly payment and put into an escrow account to cover those expenses, non-payment can mean you’re in default for all three.
Options for Handling Mortgage Default
If you’re having trouble making your payments, there are several options available to you.
Try to Strike a Deal with Your Lender
If at any point you find yourself unable to meet your mortgage obligations, the first thing to do is call your mortgage lender. As embarrassing or scary as it can be to admit to them that you’re having money trouble, let them know what’s going on as soon as possible. The sooner you contact them, the less you’ll accrue in fees associated with non-payment.
Most lenders are willing to work with you. There is great incentive for them to actually help you through a rough patch. Banks don’t want to foreclose on a house because it costs them a lot of money and earns them none.
Your lender may offer a repayment plan or revise your loan so that your payments are more manageable. You’ll never know what they can do to help until you ask. If you’d like help talking to your lender about remediation, you may be able to get help from organizations like the National Foundation for Credit Counseling. They can help you develop a strategy to get your financial affairs in order.
Borrow Money to Get Caught Up
While accruing more debt to pay your current debts isn’t an ideal scenario, if your financial troubles are temporary, it’s worth considering.
You could borrow money from a friend or family member, though it’s always wise to weigh the potential strain on relationships before doing so. You could also get a personal loan to cover your delinquency.
It’s important that you factor repayment of this loan into your long-term financial plan, though. If you can’t repay this new debt easily, you might wind up in the same spot a few months or years down the road.
Deed In Lieu of Payment
Mortgage companies may offer those who are behind on their mortgage and who don’t have a lot of equity built up in their home the option to hand over their deed in lieu of payment. This means that they essentially give up the home in order to get out from under the loan.
Chapter 13 Bankruptcy
As a last resort, you might consider chapter 13 bankruptcy. It would allow you stop foreclosure and provide you a three to five-year period to pay back mortgage arrears. While this may allow you to stay in your home and get your account up to date, it will have a negative impact on your credit and it won’t help if you still can’t keep up with payments.
Consider Selling Your Home
There are a few options for selling your home if you’re having trouble making your payments.
If you’re upside down on your loan (your mortgage balance is more than your house is worth), you may be able to talk your lender into allowing a short sale. A short sale is where the lender is willing to accept less than the amount owed for the home so that they can get most of their money back and you can get out from under the loan.
You could list your home traditionally with a real estate agent. This is likely the selling option that will net you the most money for your home.
However, there are some downsides to this when you’re having trouble making your payments.
First, it could take a while to sell and if you’re unable to keep up with payments during that period, your lender may begin foreclosure proceedings.
Next, it can cost a lot of money that you likely don’t have to sell a home. You have to cover closing costs, repairs, and other fees, and if you’re already having trouble with your payments, that may not be an option for you.
Opt for a Cash Buyer
Cash buyers, often known as professional home buyers, are a viable option if you’re in financial trouble. They generally buy houses as-is so you don’t have to make repairs that cost money you don’t have and they typically cover closing costs as well. Another bonus to cash buyers is that they can usually close the deal very quickly. You can read more about short sales here.
If you’d like to talk to Sell Your House Direct about selling your San Diego, California area home quickly for cash, don’t hesitate to contact us for a free quote!