Every homeowner’s nightmare is that they can’t pay their mortgage. Whether it is because you are not working due to the Coronavirus/Covid-19 pandemic, or you’re dealing with other financial challenges, there could be many reasons that you are behind on making your monthly payments. If adjusting your budget has not helped, here are some steps to consider if you find yourself unable to pay your mortgage.
Mortgage trouble due to Covid-19
- Contact your mortgage servicer immediately, let them know of your situation and see if there are any payment options available, such as a reduced monthly interest rate or halted interest payment.
- Homeowners cannot stop making mortgage payments – you will need to contact your lender to work out a payment plan.
- If your mortgage is federally backed, you may be eligible for additional assistance. Go to fanniemae.com or freddiemac.com to see where you can apply for assistance.
Refinance your mortgage
- Read the terms of your contract to determine the type of mortgage you have (adjustable-rate or fixed rate). If you have trouble determining the type of mortgage you have, ask your loan servicer. If you have an adjustable-rate mortgage, see if you can switch to a fixed rate mortgage. Review your budget to see what you can afford and then, either negotiate with your lender, or shop around quickly for another mortgage loan.
- Be cautious. Some adjustable-rate mortgages include prepayment penalties.
Determine whether you qualify for a government program
- The Making Home Affordable Program was created to help homeowners make their monthly loan payments more affordable in the long term (adjusting interest rate, extending loan term and forbearance of principal). Visit makinghomeaffordable.gov to see if you are eligible for this arrangement.
Forbearance may help
- If you have fallen behind on your mortgage because you recently lost a job but you anticipate regaining employment soon, this option may work best if you only need temporary help. In this arrangement, you and your lender will work out an agreement where you stop paying your mortgage for a certain period of time. When the agreed-upon period ends, you are required to make a series of partial payments for the months missed, until you bring your account up to date. This can be a smart option when you know that you’ll be back on your feet, however it doesn’t address the issue in the long term.