What Happens If I Can’t Pay My Mortgage?

Written by: David Scott

One of the most troubling things that can ever happen to a person is not being able to pay their mortgage. First the fear of being homeless or running into issues with the ownership of your house, then the worry that you could be breaking a law, issues with increasing interest rates and banks. 

Here we will take you through what to expect when you can’t pay your mortgage, what you should prepare for, how to avoid unnecessary problems and not get in trouble with the law and possible solutions for you. Although this can be a heavy topic to navigate, learning about the ins and outs of this issue will empower you to take your financial well being into your own hands. Keep reading for more information about what happens if you can’t pay your mortgage.

What To Expect When You Can’t Pay Your Mortgage

Your lender won’t come badgering you the moment you miss the first payment of your mortgage. However, your lender will begin to make certain moves after a while. First, to ensure that you pay and then if it doesn’t work, to recoup their investment and foreclose your home.

The first thing to note is that your mortgage is considered late after 15 days of the agreed upon due date of payment. The 15 days of waiting after the due date is also referred to as the grace period.

When the 15 days goes by and you still haven’t paid for your mortgage, your lender will send you mail describing the amount you owe and the date they expect you to pay. A late fee will also be added to this amount.

Then, the lender will wait for another 3 months for you to pay your mortgage before the official proceedings for the foreclosure begins. This can take between one month to three months. After this, the lender will file a notice of default at the recorder’s office. It’s possible for you to work through this issue with your lender if you still have money to pay at that time.

If you still have not paid after this period, the lender will foreclose on the house and you will be evicted. The lender will also put the house up for sale. As stated previously, though, these problems can be easily avoided if you have knowledge on the laws and processes surrounding mortgage payments.

How To Avoid Unnecessary Problems When You Can’t Pay Your Mortgage

There are times when things are difficult for everyone, we all go through financial hardship at some point. When you can’t pay your mortgage, there are a number of ways to avoid issues that will drag the situation into foreclosure. 

Call Your Lender Immediately

Calling your lender immediately once you realize you cannot pay for your mortgage will help you avoid many preventable issues. Being straightforward and honest with your lender gives them the opportunity to inform you of other options you can take to avoid foreclosure, and also can help prevent your lender from reporting you to the national credit bureau. 

Call A Counselor Approved By The Department Of Housing And Urban Development

This is one way to avoid problems as a HUD approved counselor will listen to you, look at the details of your mortgage and give you the best solution that suits your circumstances all for little or no cost. The counselor will also guide you through the paperwork. This is an excellent way to avoid additional problems and ensure you are fully informed about the legal aspect of mortgage payments.

Possible Solutions When You Can’t Pay Your Mortgage

Although being unable to pay your mortgage is a daunting predicament, there is a solution to every problem, and that rings true for this as well. There are certain ways to solve mortgage debts so that they do not lead to foreclosure, as listed below. 

Ask For Forbearance

This is reserved for when you believe your financial situation is temporary. By temporary, we mean you do not plan to outrightly stop paying the mortgage as it is just a little shake-up in your finances. Forbearance is a great way to go as it will allow you to reduce or pause your mortgage payment for the next 12 months. This buys you time to get back on your feet, since the lender will not file for foreclosure on your home since payments are paused.However, it is important you know that you will pay the mortgage for the months that it was suspended as a lump after the forbearance period.

Ask For Mortgage Modification

This is a great way to sort out your mortgage issue and make the payment easier. In a mortgage modification, the lender reduces your monthly mortgage payments and makes it spread over a longer period of time. If you have a good credit score and are willing to pay greater interest over a longer period of time, this is a good option for you. 

Rent Out Your Home

This is another option to offset your mortgage debt. If you are close to friends and family, you can move in with them for a couple of months so that you can put money earned from renting your home towards your mortgage. If you decide to go this route, you should know that the costs of maintenance and repair of the home is on you, and your tenants have the legal right to sue you if you go into foreclosure during the time you are renting the house out.

Ask For Refinancing

Do you have at least a 20% stake in the home? Do you have good credit? If you answered yes to the two questions above, then refinancing may be the best option for you. Refinancing means reworking your mortgage to one that is more affordable for you to pay. Certain factors, like lower interest rates, can be negotiated for your new mortgage. Try not to miss your next and current mortgage so that when you file for refinancing, it will be easily approved.

Ask For A Short Sale

A short sale allows you to sell your home and give the lender all the proceeds for the sale. The great thing about a short sale is that even if you sell the home for less thanthe total amount it is worth, the money will serve as debt payment for the mortgage you took. 

Realizing you can’t pay your mortgage can be a daunting topic that brings up feelings of panic or scarcity. However, knowing that others have been there and using any of the options above gives you hope that there are solutions to your problems. Becoming more informed will help you make strategic financial decisions to set you up for success.

For more detailed information please read our previous article about mortgage default.

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