When You’re Behind On Mortgage Payments, What Can You Do?

How can you catch up on a mortgage payment if you’re fallen behind and have no known options, such as an extension, refinancing, or debt consolidation available to you?

Millions of Americans are dealing with mortgage problems, so it’s not a big surprise that costly mistakes are being made. Mortgage-related debt is a different animal from what most of us are used to.

All readers, especially those with negative amortization mortgages, option ARMs, interest-only loans or so-called “exotic mortgages,” need to get a handle on the situation before the animal bites you.

Simply put, Bankrate.com’s Steve Bucci writes, if you default, the lender can take your home and sell it to get its money and expenses back. Unlike credit card debt, which is unsecured debt, defaulting on a home mortgage can start an expensive and relentless foreclosure process.

Some loans enter foreclosure status when the borrower misses the payment grace period by a week. One week! Most lenders allow 90 days before they pull the plug and “accelerate” your loan — meaning they demand payment of the outstanding mortgage loan balance.

Also, most people are unaware that once they’re late with one payment, any grace period goes away and all payments are due by the agreed-upon date, not 15 days later. So, what to do when you’re late? Pay the mortgage, pay the mortgage, pay the mortgage. As soon as you can.

You need to get current with your home mortgage company before things get worse. Contact your lender. Much as your back is against the wall, you’ve still got options. Most lenders don’t want anything to do with the property management business and will work with you to avoid foreclosure.

Ask for a repayment plan that allows you to make current mortgage payments while paying a portion of the missed bills each month. You might also be able to qualify for forbearance, in which the lender suspends payment for a temporary loss of income due to illness or injury or other such reason.

While there are drawbacks to skipping other bills to pay off your mortgage, you may have to do just that. Do what you have to do to get your mortgage payments up to date, and let your other creditors know that you have had a financial hardship and will be missing or making a short payment.

Look hard at your budget. The fact that you are behind on other bills as well as your mortgage means you should reassess. It’s time to be honest as far as your financial situation goes, and if you cannot afford your home, ask the lender for a forbearance agreement in order to sell your home.

Another option if you cannot afford to stay in your home is to ask the mortgage lender to accept a deed in lieu of foreclosure, which means you surrender your home to the bank to avoid foreclosure proceedings and costs. However, if your home does not sell for enough to cover the balance of the home loan, you’ll be held responsible for the difference.

A final option would be to contact a lawyer and ask about declaring Chapter 13 Bankruptcy to stop all collections, foreclosure or other procedures from moving forward and spread your mortgage arrears over a longer period. But this is not recommended until all other options are exhausted.