What Are My Options When I Cannot Pay My Mortgage?
First of all do not make the mistake of avoiding contact with your lender. You can find out what options your lender has for you and how they can help. There are programs that you may qualify for like a loan modification or a short refinance.
Do not hide the fact that you are in need of help by not talking to your friends and family about your situation, they may be able to help. There is no embarrassment, this is happening all over the U.S.
You can get what’s called a “work out agreement” with the bank if you think your situation will improve the bank will hold off on the foreclosure proceedings. You would still have to bring the payments up to date.
If your credit is still good you may be able to refinance with your bank and group all of your debt onto one lower interest rate loan. This will help provided the amount of income you earn can pay for this new loan amount.
If you have equity in your house, you may want to consider selling and buying a more affordable home.
If you do not have any equity in your home, you can sell it as a short sale. A short sale is when the bank is willing to accept less than what the mortgage amount is. This is something a homeowner cannot do on their own, the bank is going to want you to hire a Realtor to sell as a short sale. A short sale may be the best option with the least amount of impact in getting back on track.
The bank may be willing to take a deed in lieu of foreclosure, in other words you leave your home and any equity there may or may not be…as far as the affect this has on your credit rating it is better than foreclosure. Most banks will not except a deed in lieu in a declining market.
The worst option is foreclosure, it has the worst impact on your credit and could prevent you from being able to buy a home for years to come. The bank could also be awarded a deficiency judgement which means you would owe the bank what it has lost through the foreclosure process.