If you have trouble paying off your mortgage, you’re far from alone. Americans across the country have difficulty paying their mortgage. In fact, about one out of every 20 American homeowners is behind on their mortgage payments. Luckily, there are a number of options.
One important first step is to contact your loan servicer as soon as possible to explain your mortgage payment situation. A housing counselor can help you communicate with your servicer and figure out alternative payment options.
How to Catch Up When You’re Behind on Your Mortgage Payment
If you’re behind on your mortgage, there are multiple ways to catch up on payments.
Forbearance
You might be wondering, what is forbearance exactly? Forbearance means that you temporarily place your mortgage on hold. Your payments are suspended or reduced for the time being, and you agree to eventually repay the mortgage payments with one big lump sum or in larger installments once the forbearance period ends.
The great thing about forbearance is that during this time period, the record reflects that you’re current on paying your mortgage in spite of not making payments. This payment option is an excellent fit for homeowners who are going through short-term financial hardships like losing a job or making large healthcare payments. One of the downsides of this option is that you will, over time, pay more interest, because you are lengthening the mortgage term.
Repayment Plan
Repayment essentially means catching up on late payments when you’re behind on your mortgage. There are two repayment options, installments and a lump sum. With the repayment installments option, you agree to make your regular payments plus extra to make up for your previous late payments. Repayment installments are a great option for people who have fixed their financial issues and can handle a larger monthly sum.
Another repayment option is the lump sum option. If you are financially able to pay off your back mortgage payments in one large lump sum, your loan servicer will make your account current and reinstate your loan, which is a good way to stop foreclosure from occurring. Unfortunately, there could be some fees involved. One downside of this is that you will need a large chunk of cash in order to make this happen.
Loan Modification or Refinancing
A loan modification means you begin a new loan with either a longer payoff term or a lower interest rate, which can make your mortgage payments current and also offer you a more reasonable monthly payment that’s affordable for you and your family. Loan servicers want to make sure that your financial issues are behind you and that you can afford the new monthly payments when offering this option. You also often need to meet certain criteria, like proving a financial or personal hardship.
In addition to the loan modification option, refinancing is also an excellent option for people who want to catch up after falling behind on their mortgage payments. While refinancing does require some work on the loan servicer’s part, it is easier than some other options because they already have all of your documents and usually create the refinance loan pretty quickly.
Lower Monthly Payments Overall
Obviously, lower monthly payments are always great. But what if you could get a lower monthly payment without making any changes to your mortgage itself? Luckily, it’s possible!
You can easily reduce your monthly payment by shopping for a better price on property insurance. You can also figure out if you’re eligible for property tax abatements. This is a great and reasonable option for seniors and can seriously lower your monthly payment.
You could also get rid of your private mortgage insurance, also known as PMI, if you have enough equity. But you should take into consideration that a partial PMI claim can save you when you’re at risk of foreclosure, because you don’t have to pay a full claim to your servicer to prevent foreclosure. Instead, your insurance company would pay the servicer just enough money to cover your missed payments.
Principal Reduction
Principal reduction is an excellent option if you’re way behind on your mortgage and need to catch up. With principal reduction, your loan servicer reduces the principal on your loan, meaning they also reduce the actual value of your home. This is more of an option for someone who is super far behind in their mortgage payments rather than someone who simply can’t afford the payments anymore. Also, keep in mind that not all loan servicers offer principal reductions, so you should ask your loan servicer if they provide this option.
Local Resources
There are some great local resources out there for struggling homeowners. For example, the Florida Hardest-Hit Program offers mortgage assistance for qualified Florida homeowners with financial hardships for up to 12 months while the homeowner finds a job.
Behind on your mortgage and want to learn more about catching up on payments? Visit the Van Horn Law Group’s website here.
