Losing a job can be very stressful and may need some well-planned changes and adjustments in lifestyle to make do with the absence of income until one finds new employment.
Apparently, this situation calls for exploring ways to save money and when it gets a bit tight, one could be tempted to skip mortgage payments.
Is it going to help?
As tempting as it may seem, missing out on your mortgage payments can have unintended consequences. The longer it gets skipped, the more daunting those consequences can get.
If there’s one thing you should be very concerned about when missing payments is foreclosure.
While it may not necessarily happen by missing out on one, two, or three scheduled payments, it does take you closer to that probable outcome.
Remember that a mortgage is a legal agreement between the borrower and lender where it is the primary responsibility of the borrower to pay back the money through monthly payments for a home purchase upon signing the contract until the full amount is paid.
Skipping your regular mortgage payments violates the terms of the mortgage agreement and the lender has the legal right to seek redress.
Legal proceedings usually end up in foreclosure of the property in favour of the lender.
The foreclosure process
While a foreclosure can be a lengthy process, lenders often resort to other means to enforce the collection of payments.
Here’s the typical process;
Generally, your mortgage may only be considered late after 15 days of your missed payment due date, which is considered as the grace period.
Once the grace period has lapsed and no payment has been made, the lender usually sends out a notice by mail notifying you of your missed payment and provides another date which payment is made demandable.
In most cases, a surcharge is allied as a penalty for the late payment.
The process is usually considered and takes place around three months of payments missed and foreclosure proceedings are expected.
The lender files a “notice of default” with the local county or body of government that deals with such matters.
The filing process usually takes between a month and up to three months, depending on several factors that require time.
Within this period, borrowers are usually allowed to negotiate with the lender to service the loan payments to resolve the matter, such as compromising on a revised repayment schedule or going into a short sale of the mortgaged property.
If there has been no positive outcome between the borrower and the lender during the pre-foreclosure period, the former moves forward to foreclose the mortgaged property.
Once the process is completed, the delinquent borrower will be evicted from the property and ownership will be in favour of the lender who chooses to sell the property via direct sale or auction.
Act right away before it’s too late
Missing out on your mortgage payments can be stressful, but worry not because there are several available remedies to help you make your payments.
During these trying times, lenders understand the hardships people are going through and can provide ways and means to avoid people getting their homes foreclosed.
The moment you think you may miss out on your mortgage payments, contact your lender right away.
Typically, there are several ways lenders provide respite for borrowers and as a means to avoid foreclosure.
Lenders usually offer to refinance the mortgage, which means offering new loan terms and rates which are recalculated to cover the missed payments and the remaining balance of your mortgage payments.
Doing so will not affect credit background and could even help reduce the number of monthly payments.
This is where the lender and borrower agree on options that will work on the latter’s budget and re-commit to start making payments. The common options are usually based on the borrower’s commitment to making up for the missed payments with late fees included.
This is a method where mortgage companies agree to temporarily suspend mortgage payments for a certain period and deferred payments are charged towards the end of the loan term.
The lender or mortgage company agrees to change the terms of the loan such as amount due, loan term and interest rate, which are often computed to make monthly payments more manageable for the borrower.
With these remedies available for homeowners, it is important to not panic and find ways to avoid the stress of getting your property foreclosed.