Unless you are amongst the lucky few, most people need a mortgage to be able to buy their home. Just because you could afford your mortgage when you took it out, circumstances can change, so what happens when you can’t keep up the monthly payments? Will your home be taken away or do you get time to recover?
Immediate Consequences
If you miss a payment, the first thing to do is not panic. Often lenders will have a grace period of around 10-15 days (check with your provider). In that time they might not even contact you other than a brief reminder. You could start incurring late fees, which will be charged on top of your monthly payments. It’s also not worth stressing about your credit score yet; most of the time it’s not reported that you’ve missed a payment until a couple of weeks have passed.
Contacting Your Lender
As soon as you miss a payment, your best option is to get in contact with your lender as soon as you can to work things out. If you’ve not yet done this, after 30 days you should expect to hear from them via call, letters and emails. There will now be questions over your willingness to pay your loan especially if you’ve not had any contact with the lender to make them aware of your situation. Typically, after 30 days, your credit score will start to drop, and your late fees will start to really stack up.
Escalation
This is where things start getting a bit more serious. After missing several payments, usually 4 in a row, your provider might issue you a notice of default. It gives the lender the ability to take legal action to recover their money, including starting the home foreclosure process. If you’re unable to come to an arrangement or catch up with past payments, then your provider could end up selling your home. Even then, after losing your home to foreclosure, you might still owe a deficiency judgment – the difference in cost of what you owe and the price your property sells for. Long-term, foreclosure will make getting any other kind of loan, credit card or another mortgage harder.
Options If You’re Struggling
Don’t lose hope! Even though the consequences can be scary, there’s a lot of help you can get before it all gets serious.
- Forbearance – If being unable to make your payments is temporary, then you can have them temporarily paused or reduced for a short period. Once you can make the payments, you’ll then make up the amount you missed either as a lump sum or spread out.
- Repayment Plan – An agreement made with the lender to spread out missed payments over time. Good if you’ve only missed a few.
- Loan Modification – If your issues stopping you from paying aren’t going anywhere, then the lender may change the terms of the mortgage to make the payments more manageable.
As you can see, missing a payment or even a couple doesn’t mean you instantly lose your home. Remember that there’s plenty of help and options to support you, and the earlier you communicate with your lender, the more options you could have to prevent losing your home.
Meg is an author at Cinnamon Hollow. She writes on a variety of topics sharing tips and ideas for daily life.
