What To Do If You Can’t Afford Your Mortgage Payment

There’s a good chance that your mortgage is your most costly expense. For that reason, there could come a day when you realize that you can’t make your next payment. As scary as it may be, it’s important to take a step back and consider your options. 

Below are some steps you can take to address this difficult situation.

Assess your financial situation

Before taking any steps, evaluate your current financial situation. Look at your income, expenses, and savings to understand where your money is going and identify areas where you can cut back. Consider creating a budget to help manage your finances more effectively.

Contact your lender

Reach out to your lender as soon as you realize you cannot make your mortgage payment. They may be able to offer temporary or long-term solutions, such as a loan modification, payment deferment, or forbearance. Be honest about your financial situation and be prepared to provide documentation to support your claims.

Investigate government programs

Research available government assistance programs, such as the Home Affordable Modification Program (HAMP) or the Home Affordable Refinance Program (HARP). These programs are designed to help homeowners avoid foreclosure by modifying or refinancing their mortgage to make it more affordable.

Prioritize your mortgage payment

Ensure that you prioritize your mortgage payment over other debts or expenses. This may involve cutting back on discretionary spending or seeking additional income sources, such as taking on a part-time job or freelancing.

Consider refinancing

If you have sufficient equity in your home and a decent credit score, you may be eligible to refinance your mortgage. Refinancing can potentially lower your interest rate and reduce your monthly payments, making it more manageable in the long run.

Loan modification

Explore the possibility of a loan modification, which involves changing the terms of your mortgage to make it more affordable. This may involve extending the loan term, reducing the interest rate, or changing the loan type (for example, from an adjustable-rate mortgage to a fixed-rate mortgage).

Sell your home

If you are unable to make your mortgage payments and other options are not viable, you may consider selling your home. If you have enough equity in the property, selling the home could provide you with the funds needed to pay off the mortgage and avoid foreclosure.

Short sale

If you owe more on your mortgage than your home is worth, a short sale may be an option. In a short sale, your lender agrees to accept less than the full amount owed on the mortgage, allowing you to sell the home and satisfy the loan. Keep in mind that this can negatively impact your credit score.

Deed in lieu of foreclosure

Another option to avoid foreclosure is a deed in lieu of foreclosure, where you voluntarily transfer the ownership of your home to the lender in exchange for the cancellation of the outstanding mortgage debt.

Summary

If you can’t afford your mortgage payment, it’s essential to act quickly and explore all available options. By contacting your lender and keeping an open mind to all options, you may be able to find a solution that works for you and helps you avoid foreclosure.