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Mortgage Payment Behind? Some Things to Consider

Article By: Barbara Gibson

Mortgage payment behind? You are not alone. Mortgage payments may get behind for any of a number of reasons. Some of the most common reasons include:

• Downsizing – It can be difficult, if not impossible, to make timely mortgage payments without the steady income employment brings.
• Catastrophic Illness – Even with a good insurance plan a catastrophic illness can cost thousands of dollars in medical bills and lost wages.
• Divorce – Divorce exacts a significant emotional and financial toll in terms of cost.
• Poor Money Management – Varying estimates put average American credit card debt at $5,000-$8,000; spending exceeds saving by higher percentages than at any other time in history. It should come as no surprise that foreclosures and bankruptcies have also reached record highs.

The good news if your mortgage payment is behind is that you need not despair. There are a few options that you can consider to avoid foreclosure and the associated negative credit rating.

1. First, review your budget, including all income and expenses, to get a clear idea of your financial position. When you write it all down you may be surprised to find that you have more money to work with than you thought, especially if you are willing to do some cutting, shifting, and plugging wasteful money leaks.

2. Call your mortgage company immediately. Believe it or not, your mortgage company is not the enemy. Although foreclosure proceedings are a recourse reserved for the event that you are unable to cure the default your mortgage company ultimately loses money when you default. If you have a good payment history the company is more likely to work with you on repayment options. Make sure that you have worked closely with your budget before you call. You will want to be able to talk with the mortgage company about what you realistically expect to be able to pay. It is very important that you honor the payment arrangements that you make.

3. Tap into your 401(k) or 403(b). Check with your plan administrator to determine if this option is right for you. Many plans do offer a provision that allows for withdrawal if your primary residence is in jeopardy. It is important that you talk with your tax advisor to understand how this decision will impact you at tax time.

4. Consider selling as soon as you anticipate that there will be a problem. Many times our hope for a last minute miracle prevents our facing the inevitable. If it seems divorce, downsizing or another event that impacts your finances is on the horizon, make sure that you can fall back on plan B. In the long run it may be better to save your credit rating and your sanity by selling while you are still solvent.

5. Consider refinancing. This can be a good option for lowering your mortgage payments and interest rate if you have strong credit. It’s a good idea to bank any proceeds at the most attractive interest rates you can find.

6. Consider options for additional income or slashing your budget. Some ideas include:

    

   • Take a second job – Even if time constraints or childcare issues make taking a second job seem out of the question a little creativity may make this option a viable consideration. For example, could you work online, contract, consult or sell crafts? Again, it is important to be creative and keep your options open.
   • Take in a roomer – This can be a great option if you have a spare room, an attic or a basement apartment.
   • Change your deductions – Rather than give the IRS a loan and wait for a big check once a year keep, and use, more of your paycheck.
   • Take a hard look at your budget. When you choose to spend without a plan it usually results in overspending, often by hundreds of dollars each month. It would be better to set savings and spending goals, few things are more comforting that a nest egg to fall back on.

7. Look to your portfolio. Talk with your tax advisor about this option. It may be worth your time to consider selling some assets and using some proceeds to cover the mortgage if you anticipate that you will be back on track financially within the foreseeable future. 

8. Ask for help – It may seem difficult to do but if the resources are available consider asking friends or family for a loan. If this route works for you make it work for the best by maintaining an open dialogue about repayment plans and any other expectations.
9. Reduce debt and maintain a spending/savings plan – let this temporary crisis be instructive. Make the necessary plans now to avoid a repeat of late/missed mortgage payments in the future.

    About the Author 

   Barbara Gibson is a writer, advocate and a contributor to www.super-mortgages.com. She has researched and written extensively on credit, residential mortgage loans, home equity lines of credit and home-buying.