What to do if You’re Behind on Your Mortgage Payments

Are you like some Americans and finding yourself behind on mortgage payments or in fear that you may soon become behind? If this is you, you’re not alone; many other Americans are finding themselves in this situation due to high rates of inflation or other financial hardships. 

While this is a scary situation, there are steps you can take to get caught up or to avoid falling behind. What’s important is that you take proactive steps to remedy the situation as daunting as it may be. In this blog, we’re going to break down some of your options if you are in this situation. 

Call Your Lender

If you’re behind on your mortgage payment or feel you may soon fall behind due to financial hardships, your first step should be to call your lender. While most bank loans must be more than 120 days delinquent before foreclosure activity can legally begin, although this varies by state, it’s a good idea to get in contact with your lender to let them know your current situation, so this doesn’t happen to you. 

It’s important to note that foreclosure is an expensive process, and most lenders want to do whatever they can to avoid this undertaking. If you’re proactive and get in contact with your lender as soon as possible, they’ll be able to give you insight into your options and work with you toward repayment or avoiding falling behind at all.

Set up a Repayment

For those already behind on their mortgage payments, repayment is an option where you pay back missed payments in either a lump sum or added onto your existing monthly payment over a set number of months. Repayment is a good option for those who have experienced financial hardships like a job loss, but those hardships have now come to an end.

Apply for Mortgage Forbearance

Mortgage forbearance is a route borrowers can take where their mortgage payments are either temporarily suspended or reduced for a set period of time. When you choose this route, you agree to pay back the amount either via a lump sum or through installments added to your regular payment amount. With forbearance, your record reflects that your account is current, so you won’t be penalized. This option is best for people facing temporary financial hardship that is currently ongoing but will be remedied in the near future.

Modify or Refinance Your Loan

While the two options are similar, loan modification and loan refinancing are different options that both reduce your monthly payments. Loan modification entails changing the original terms of your loan whereas a refinance pays off the initial loan and replaces it with a new one. With today’s high interest rates, both loan modification and refinance would typically involve lengthening the term of the loan or adjusting the loan structure rather than an interest rate reduction.

Keep in mind, loan modifications may negatively affect your credit. However, refinancing often requires a better credit score and an acceptable debt-to-income ratio, so you’ll want to speak with your loan provider to see which option is best for you. 

Principal Reduction

A principal reduction is simply a reduction on the principal on your loan. Principal reductions reduce the amount you owe on the loan overall thus reducing your monthly payments. Not all loan providers will agree to a principal reduction, so like with the other options, you’ll want to get in contact with your provider to see if this is a possibility. 

Reduce Your Monthly Housing Payment

A homeowner’s monthly housing payment encompasses more than just principal and interest. There’s also taxes, insurance, and other fees. One way to lower your monthly payment without touching your loan is to shop around for a cheaper homeowner’s insurance policy. That way, your monthly payment is lower but you don’t have to apply for any of the above options with your lender.

Be Proactive

As stated, no matter which option you’re leaning toward, it’s important to get in touch with your loan provider to let them know where you’re at, especially if you’re already behind. They’ll be able to help guide you as to the best course of action.

If you have any questions, feel free to reach out to us at (703) 674-1777 or via our website. We offer no strings attached consultations to those in need.