In even the best real estate market cycles, unexpected financial problems can affect a homeowner’s ability to pay their mortgage. However, with the past several years of real estate value gains to shore up property values, a homeowner in default does not necessarily have to repeat the actions of almost 15 years ago.
While working toward keeping the home is the priority, sometimes selling the property might be the most practical solution. If your home’s value exceeds the mortgage amount, selling could allow you to pay off your mortgage and possibly secure a financial cushion. But what if a homeowner in default does not want to sell, or views a sale as a last resort measure?
The first step toward resolution is acknowledging the situation without panic. A mortgage default occurs when a homeowner fails to make their mortgage payments on time, typically after 90 days of non-payment. It’s a signal to take immediate action, but not a reason to lose hope.
Communication is key. Reach out to your lender as soon as you realize you might miss a payment. Lenders generally prefer to avoid foreclosure because it’s costly and time-consuming. Engaging in open dialogue can lead to discovering available options like loan modifications, repayment plans or forbearance agreements.
A repayment plan involves agreeing on a plan to pay back what you owe over time, along with your regular payments. A loan modification changes the terms of your loan to make the payments more manageable, and a forbearance agreement either temporarily reduces or even suspends payments, though interest may still accrue. If possible, a refinance can secure a new loan with different terms to pay off your existing mortgage.
Don’t navigate these waters alone. A HUD-approved housing counselor can offer invaluable guidance, often at little to no cost. They can help you understand your options, rights, and prepare you to discuss these with your lender. Additionally, legal advice might be necessary, especially if foreclosure seems imminent.
Familiarize yourself with your rights as a homeowner. Foreclosure laws vary by state, so it’s essential to understand the specific regulations and timelines in your area. Be wary of scams promising easy fixes to mortgage defaults and foreclosures. Reliable information and legitimate assistance are your best defenses.
Mortgage default is a challenging situation, but it’s not the end of the road. By taking proactive steps, communicating effectively with your lender and seeking professional advice, you can navigate through these turbulent waters. Remember, facing the problem head-on with a positive outlook and informed decisions is your best strategy for regaining your footing in the world of homeownership.
If you’d like to learn more about the current local market conditions, reach out to Theresa Grant, Real Estate Broker (DRE #01202881), at Theresa@HomesInLakeArrowhead.com. You can also follow on social – Instagram: @theresagrantrealtor|YouTube: @theresagrantrealtor. Theresa is a Broker Associate with Coldwell Banker Sky Ridge Realty.
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