Business Marketing & Finance Resources

What if I Can’t Pay My Mortgage?

In the last few years, the real estate market has been in turmoil. People who purchased their homes at extremely high prices and got a fixed rate mortgage have found themselves in a very financially stressful position. Many of them have lost their jobs and have been unable to find other employment. In the end, with no money coming, people are having a difficult time paying their mortgages. Ultimately, untimely payment or no payment at all will result in home foreclosure. But does this always have to be the case? Are there ways to avoid foreclosure when you cannot afford to make your monthly payments for reasons beyond your immediate control?

Fortunately, there are. Your situation is not a good one, but there are still a few steps you can take to hopefully save your home and credit.

1.) Communicate with your lender. We cannot stress the importance of this. Give your lender a call right away and let them know what your situation is. Some lenders will actually help you get on an alternative payment plan. Empathy is high during these difficult economic times. You might be pleasantly surprised with the deals that can be worked out.

2.) If you have an adjustable rate, try to get an interest rate freeze. Once again, in order to do this, you will need to speak with your lender. Not everybody qualifies for an interest rate freeze. The work is done on case-by-case basis. Nevertheless, it is worth consulting one.

3.) If the above two plans fail, it is time to get serious about selling your home before it forecloses. There are many reasons why you would want to do this, and one of them is because you do not want to have a foreclosure on your record. They are extremely damaging to your credit. Contact your Realtor as soon as possible about getting your home on the market and selling it quickly.

4.) You may also need to contact a credit counselor who can speak with your lender. These days, lenders are getting more phone calls about potential mortgage defaults than they can handle. A credit counselor will be able to get in contact with them and plead your case so you can focus on other things like finding a new job. But be careful, there are many scam-artist credit counselors out there. Make sure yours is accredited.

Being near foreclosure on a home is everyone’s worst nightmare. It can have some serious consequences for you if you do not see it coming and fail to prepare yourself. Communication is key. It could be the difference between owning a home in the next few years or continuing to rent. If you find yourself in this unfortunate situation, contact everyone you can about it and try to take all possible steps to fix it. When a foreclosure happens, it makes us face the bleak reality of not being able to find a loan for a new home. Don’t let this happen to you. Be as proactive as you can.

Despite what you might think, getting a personal loan doesn’t have to be a difficult process. Whilst it’s true that you have hundreds of options open to you and an often bewildering number of choices to make before you put in a formal application, it’s quite easy to make sure you make the right decision at the right time and that you also save yourself time and money into the process. There are basically three steps you need to take before you choose the loan that’s right for you:

Step One – Know what you want

The first thing you need to do is to decide which kind of personal loan will suit you and your circumstances best. For example, if you’re a homeowner then you can look at taking out either a secured loan or an unsecured one depending on your preference. If you don’t own your own home then you will probably be limited to an unsecured loan.

Secured loans are given to property owners and will use your home as a guarantee against the money you borrow. So, if you stop making loan repayments, your lender can use your property to recover their loan(s). Because you’ll be using a guarantee you’ll generally be given better (i.e. lower) rates of interest on the money you borrow. Unsecured loans, on the other hand, don’t need you to be a property owner as there is no guarantee involved. This lack of guarantee does make the loan slightly more expensive and may also give you restrictions on how much you can actually borrow although this does vary from lender to lender.

If you’re not a property owner then this kind of unsecured loan will generally be the only option open to you but it’s worth remembering that many homeowners now prefer an unsecured loan to a secured one in any case as they don’t want to risk losing their property if things go wrong down the line.

Another choice you’ll need to make here is whether to take out a loan with a fixed or a variable interest rate. If you are given a fixed rate then your monthly repayments will stay the same all of the time. A variable rate, however, may see your repayments change if underlying interest rates change at any time.

Step Two – Stick to what you can afford

It’s quite easy to raise finance in most cases and it’s very tempting to borrow more than you actually need simply because you can. It’s really important therefore that you work out exactly how much you need to borrow and how much you can afford to repay on any loan. The key thing to remember here is that it not a lender’s job to work out how much you can afford – it’s your job! You can’t blame your lender later if they let you borrow more than you can afford to repay.

The easiest way to do this is to look at your monthly outgoings and to work out how much cash you have spare once you’ve met your existing financial obligations and spending for the month. This sum is basically what you can afford to pay as a loan repayment every month. It is, however, worth noting that you should always leave a bit of cash spare for emergencies – so you shouldn’t commit all of your spare cash for loan repayments but should also leave a bit to cover you along the way.

You can then check if your spare cash and loan amount needs marry up OK by looking at an online loans calculator, for example. These tools will let you work out how much average repayments may be or how much you can borrow based on a repayment sum.

Step Three – Shop around for the best deal

Your average personal loan product may well look exactly the same as the next one you look at but that doesn’t mean it will cost you the same. Interest rates can vary widely across the industry and you can end up paying a lot more than you need to unless you shop around for the best rates.

The majority of loans will all do the same things and will carry exactly the same terms and conditions. So, if you bear this in mind, you’ll get no advantage by paying a higher interest rate if there are no add-on benefits. The easiest way to shop around nowadays is, as ever, via the Internet. Even if you just spend a few minutes on an online loan rate comparison site then you’ll see some big differences in the interest rates being charged. And, remember, the lower the interest rate you pay, the lower your monthly repayments will be. And, the less you pay back every month, the less you’ll pay back overall. This all adds up to savings for you.

If you follow these three steps then you’ll be well on the way to finding exactly the right kind of loan to suit you best – and you’ll make sure that you make the kind of savings you can with minimum fuss and effort.