If you’re experiencing a financial crisis, you might consider just not making mortgage payments at all. It’s a choice that some people might find useful in trying circumstances, but overall, it’s a poor choice.
The rationale is that it will probably cause you to lose your house and have long-term effects on your credit. As a topper, the bank doesn’t really want your house. Lenders are willing to help and would rather not foreclose.
So don’t adopt the tactic of pooh-poohing your payment and hoping for the best. Let’s reiterate: It is a bad idea. Here’s why.
If you’re struggling to make your mortgage payments, the thought of losing your home can be terrifying But before you jump to conclusions, know that there are options available to help you navigate this challenging situation
First things first:
- Don’t bury your head in the sand. Ignoring the problem will only make it worse.
- Reach out to your mortgage servicer immediately. They’re there to help, and the sooner you contact them, the more options you’ll have.
- Get expert guidance. Contact a HUD-approved housing counseling agency for free, personalized advice. They can help you understand your options and navigate the process.
Now, let’s explore some of the options available to you:
1 Refinance: If interest rates have dropped significantly since you took out your mortgage, refinancing could lower your monthly payments and make your mortgage more manageable
2. Loan Modification: This involves working with your lender to change the terms of your loan, such as lowering the interest rate, extending the repayment period, or even reducing the principal balance.
3. Repayment Plan: If you’re just a few payments behind, you might be able to work out a repayment plan with your lender to catch up gradually.
4. Forbearance: This is a temporary pause on your mortgage payments, usually granted during times of hardship. While interest may still accrue, it can provide some breathing room to get back on your feet.
5. Short Sale: If you owe more on your mortgage than your home is worth, you might be able to sell it for less than the balance and have the lender forgive the remaining debt.
6. Deed-in-lieu of Foreclosure: This involves voluntarily giving your home back to the lender to avoid foreclosure. This option can help you avoid a negative impact on your credit score.
Remember, even if you can’t afford your mortgage right now, there are ways to avoid losing your home. Reach out for help, explore your options, and find the solution that best fits your situation.
Here are some additional resources to help you:
- HUD-approved housing counseling agencies: https://www.hud.gov/topics/housing_counseling
- CFPB’s “Find a Counselor” tool: https://www.consumerfinance.gov/ask-cfpb/find-a-housing-counselor-en-294/
- HOPE™ Hotline: (888) 995-HOPE (4673)
Don’t let fear paralyze you. Take action, explore your options, and find a way to overcome this challenge.
Consequences of missing payments
Monthly mortgage payments are due on the first of each month, and after the 15th of the month, they are deemed late. That’s when late fees, penalties, and correspondence from the loan servicer begin.
“First off, you’ll get a letter in the mail from your servicer which says you owe x amount and it must be paid by this date,” says Mary Bell Carlson, an accredited financial counselor known as Chief Financial Mom. The letters will outline any penalties and late fees and will often include an offer of help.
“The bank is not in the business of owning homes—that’s not what they want to do,” she says. “They’re not looking to take over your house. ”.
Lenders, she continues, want to find ways to keep you in your home and prevent drawn-out foreclosure procedures.
In the meanwhile, be cautious if someone calls or emails you claiming to be your lender and that you haven’t made a payment. It’s probably a scam, says Carlson. Your lender will send notifications via the postal service.
Will not paying my mortgage damage my credit score?
After 30 days of nonpayment, your loan will default. Your credit score will suffer as a result of the mortgage servicer likely reporting the nonpayment to the credit bureaus and filing a notice of default with your local government.
“The credit is the first thing that gets hit. Your credit will take a nosedive if you stop paying your mortgage,” Carlson says.
“Your credit will deteriorate if you simply stop making payments, and it will take years for those things to fall off.” ”.
A low credit score may impact your future ability to get a mortgage or to rent.
“Anyone who has recently filed for bankruptcy or has experienced a foreclosure will not be able to rent to them, as that will be a major red flag,” Carlson cautions.
As you continue to miss payments, penalties, interest, and correspondence from lenders will accumulate. Eventually, you’ll get a notification that the foreclosure process is underway.
Can you legally stop paying your mortgage or rent right now?
FAQ
Is it possible to stop paying mortgage?
What happens if you refuse to pay mortgage?
Can I walk away from a mortgage?
How do I get Out of a mortgage legally?
When you’re in a situation where you need to sell quickly but don’t want to sink money into the sale, the best way to get out of a mortgage legally is by selling to a company. This way, you’ll get the most money for your home without damaging your credit. HomeGo provides same-day offers and a fast closing process that takes just 7 days.
Should I Stop Making my mortgage payments?
Before you decide to stop making your loan payments, it is best to get it in writing from your lender on how they will handle your missed payments. In the media, and even on some bank websites, borrowers were being told that they were granted a 60 to 90 day forbearance period before their next mortgage payments would resume.
What happens if I don’t pay my mortgage?
After 30 days of nonpayment, your loan will default. The mortgage servicer will probably file a notice of default with your local government and report the nonpayment to the credit bureaus, which will negatively impact your credit score. “The credit is the first thing that gets hit.
What is the fastest way to get out of a mortgage?
Selling your home to a home-buying company allows you to beat a foreclosure filing, resolve estate issues, or liquidate your assets quickly. The best part? With this option, your credit remains unharmed! Hands down, this is the fastest way to get out of a mortgage contract legally. Wondering How to Get out of a Home Loan?