A few missed mortgage payments and the ball gets rolling! You silently dread the moment you will receive the first notice for defaulting on mortgage. Many homeowners can’t resist the temptation to bury their head in the sand, hoping the problem will go away on its own. But it turns out to be their biggest mistake. A far better alternative is to try to apprehend your situation well in advance and take some precautionary steps. Here is what you can do and where you can find help:
Keep your lender in the loop
If you are aware of the financial troubles looming in the horizon and feel that you won’t be able to pay installments in the near future, you should immediately contact your lender. They will surely be able to suggest options. Letting your lender help you beforehand is far better than trying to find a solution after missing your monthly payments.
Your lender may be willing to help and modify your loan. This can be very helpful if you can’t afford the payments due to high amount of mortgage installment. They will extend your mortgage term, so that you can pay lower installments over a longer period of time.
Are you insured?
What if you will miss mortgage installments because you lost your job? It can also happen due to an accident, sudden illness or the death of the spouse (if he or she was contributing to the payments). First of all, check if you are covered by Mortgage Payment Protection Insurance, also called Accident, Sickness and Unemployment insurance. Many homeowners opt for insurance at the time of mortgage approval, but later forget about it completely. You should look through your mortgage paperwork and double check with your lender or the broker who you used, when you took out the mortgage.
Can you reduce lifestyle expenses?
Carefully evaluate your spending habits. Cut into unnecessary expenses.
Do you have recurring direct debits each month like gym membership, magazine subscriptions? You may have subscribed to an online service a year ago, never to use it. Cancel these recurring expenses immediately, particularly those you are not getting the value for money for.
Do you buy coffee or take away drinks during work hours? These are everyday expenses you can put under the category of smaller non-essential items. Put them in order of priority. Pick off the lower priority items first and cut them out one at a time.
You can save money on essential utilities. The trick is to shop around for the best deals on things like homeowners insurance and life insurance.
Try to take up a part time job for some additional income. These sound like a very basic piece of advice, but given the fact that faulty lifestyle is behind a majority of foreclosure cases, you should keep a record of every penny you spend until your finances are back on track.
Take advantage of free counseling
The government works with some counseling agencies in all the states to provide free advice to distressed home owners. These counselors can suggest you some great options like government-backed mortgage modification and refinance programs.
Sell your home
If you know that your situation won’t change in the long term, you can sell your home yourself and renting or moving to a cheaper property.
You should work towards this option as early as possible, even before you start missing mortgage payments. You can also talk to your lender to know if they can help you sell your property through an Assisted Voluntary Sale scheme.
You can also sell to a cash buyer who will close the deal within a few days. If you sell to a regular buyer, the closing may take too long. By selling to a cash buyer, you can expedite the property’s transaction, saving a lot of money on rent and other expenditures and closing costs.