Options if You Are Behind on Your Mortgage
According to best estimates, millions of Americans are behind on their mortgages or on the verge of defaulting. Losing a home is devastating, not only emotionally but also financially. For example, research has shown that losing a home to foreclosure often leads to defaulting on other loans and relocation to less safe neighborhoods.
Fortunately, help is available, but borrowers need to act quickly. At Nowack & Olson, our Plantation bankruptcy lawyers have helped many people avoid foreclosure by modifying their loans or filing for bankruptcy. Below, we look at what you should do if you are behind on payments.
Contact Your Lender
The last thing you should do is wait for your lender to contact you. Instead, be proactive. Call your lender and be prepared to discuss why you have fallen behind. You might have lost your job or had your hours reduced. Alternatively, someone in the family might have fallen sick, and you need to commit all income to medical care.
Realize that your mortgage servicer might be different than the bank you got your loan from. Look at your paperwork to identify who to call.
Forbearance allows borrowers to temporarily suspend or reduce their mortgage payments. Forbearance gives borrowers some extra breathing room until they can get back on their feet. The lender agrees not to initiate foreclosure while you are in forbearance, provided you follow the terms.
According to marketplace. org, over 2.7 million Americans are currently in forbearance. President Biden has extended the moratorium for foreclosures of homes with federally-backed loans.
Even if you have a private loan, your lender probably has a forbearance program in place. Call to ask. A few months of reduced (or no) mortgage payments might be all you need to get back on your feet and catch up on payments.
Consider Loan Modification
You might seek more permanent changes to your mortgage. For example, you might want to draw out the term from 15 years to 30 years or even 30 years to 40 years. Doing so can reduce your monthly payment, though you will pay more over the life of the loan due to interest. But this change might be just what you need to stay in your home.
You can also consider modifying the interest rate. If you have a variable interest rate, you might move into a fixed rate. Or you could seek to reduce the interest rate, which will ultimately reduce your payments. Our loan modification lawyers in Plantation have helped many people “reset” their mortgage so that they do not lose their homes.
Consider Whether to Sell Your Home
Selling might be an option, especially if your home’s equity has continued to appreciate, even during the economic downturn. If your home is worth more than the loan, then you could realize some equity upon sale and preserve your credit score.
Going ahead and selling is preferable to a foreclosure, because you have no idea how much the bank will sell the home for. They might accept an amount that is less than you could get if you sell yourself.
Filing for Chapter 13 protection can immediately halt a foreclosure. You also can catch up on past-due payments over several years and can stay in your home provided you stay current going forward.
Call Nowack & Olson today to discuss these and other options at 888-813-4737.