What Happens If I Can No Longer Pay My Mortgage Payments?

What Happens If I Can No Longer Pay My Mortgage?

Mortgage payments
July 15, 2022

As the rate of unemployment continues to climb, a growing number of people are actively looking for methods to reduce their monthly expenses and save money. For those who have a mortgage on their heads, there is a high possibility that you may find yourself in a situation where your funds are dry and you’re not able to pay for your mortgage.

It is important to remember that falling behind on your mortgage payments can have a far more significant impact on your credit score than failing to pay your rent on time. In the worst-case scenario, it could put your house at risk.

Nonetheless, there’s always a way out of such situations and this article will take you through the various consequences you may have to face as well as the options available to help you sail past the storm.

Let’s get right down to business.

What Are the Consequences of Falling Behind?

After the first 15 days have gone and you still haven't been able to make your payment, a late fee will be charged.

Further, after 30 days if you are still unable to make the payment on your loan, it will officially be considered a default. When this happens, your lender will notify the credit bureaus that you have gone way past your due dates and your credit score will tumble.

There are some situations where you may go past the 120-day late mark on your mortgage payments, which would then begin the foreclosure process. After that, there will be a long legal battle where the lender will take control of your house and you will be forced to leave the property.

The mortgage lender's intention is to sell the home and use the money to pay off the remaining sum on your mortgage.

What Are The Stages Leading To The Foreclosure Process?

Delaying payment on your mortgage can often lead to foreclosure, which can be a long and difficult process. Foreclosures only occur once you've missed mortgage payments for more than 120 days. Your creditor will investigate other possible methods of payment before beginning the foreclosure process.

Typically these are the stages leading up to the foreclosure:

Grace Period

Your mortgage is not considered late until 15 days have passed from the original due date. This time frame is referred to as the grace period by lenders.

Letter with Late Fee

At this stage, your lender will send you a letter. In the letter, they will specify the amount due, the date of payment, and late fees.

Pre-foreclosure

At this stage, your lender will submit a "notice of default" to the county’s office. Depending on who is in charge of servicing your loan, this term might extend anywhere from 30-120 days. You still have a chance to sort things out with your lender during this period by negotiating a revised repayment plan or any other amicable solution.

Foreclosure

If you have surpassed more than 3 months, the lender will proceed with the foreclosure process on the property. You will be forced out of your house, and it will be sold either through a real estate company or will be auctioned.

Also read: Reasons For Refusal Of Mortgage Pre-Approval

What options are available to you if you want to avoid foreclosure?

Lenders are aware that many people are going through difficult times right now, and they want to help those who ask for it.

If you're feeling overwhelmed by the pressure of making decisions about your home, don't worry- there are options available to you. You can always get in touch with your lender if things start to escalate, but there are typically some alternatives that they will offer you before it gets to that point. Here are some of the most common options:

Refinancing

The lender will give you a new loan to cover up for the delayed payments in addition to what you owe on the property. This new loan will come with a different interest rate and the terms and conditions will also be different. With this option, your credit score will not dip, and will help you ease off your monthly payments a bit.

Repayment

This is an option in which you and your lender mutually devise a strategy that is suitable for your financial situation and enables you to start making payments. You will strive towards continuing to make payments as well as making up for the late fees over time.

Forbearance

In this option, the mortgage company agrees to temporarily halt your mortgage payments for a while. The delayed payments will be added to the end of your loan.

Loan Modification

In this option, the mortgage company modifies the terms and conditions of your existing loan, including the amount owed, the interest rate, and the duration of the loan to help you reduce the premium amount you are required to pay the lender each month.

Conclusion

When it comes to delayed mortgage payments, the overall experience is never pleasant and while the above solution might sound like last resort, it is offered only in cases of dire emergencies (like foreclosure).

At times there are some lenders that may force you to evacuate your house, while others will impact your credit score, and at times, few will do both. But if you are in survival mode, the best thing you can do is try to reduce collateral damage and use these options to help you get back on track.

Irrespective of how bad your financial outlook may be, finding solutions proactively can help you avoid foreclosure or bankruptcy and help you get back on track in the future.

If you're in a position where you feel like you have no other options left, Elite Properties purchase properties in as-is condition and that can be your savior. Not only we will help you avoid foreclosure, but we will also work to make sure your credit score doesn't take any more hits.

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