What to do if you can’t make your monthly payments!
Posted on January 23rd, 2008 by Admin under Credit, Foreclosure, Mortgage, Quick Tips
If you’re having a tough time making your monthly mortgage payments then read the rest of this article and maybe you will be able to figure out how to make ends meet. There are 6 different decisions you can make in order to make ends meet. Some of them may be very difficult to make but in order for you to make the right decision you need to have no emotion. I know it’s extremely tough to have no emotion when you’re deciding if you should keep your home or not but having no emotion will be better for you in the long run. Below are the 6 decisions you may need to make:
1. Re-negotiate your monthly payment with the bank. I’ve heard a number of people have tried to do this and have not succeeded, but more recenently banks are starting to open their ears. I just heard a story about a CPA who was working out new monthly payments with his clients mortgage companies and coming up with great results. Supposedly he helped lower his clients interest rate down to 2% which allowed his clients to keep their home.
2. Refinance your loan. If you are in a situation where you have a high monthly mortgage payment due to a high interest rate and you have enough equity left in your home to refinance, then I highly suggest this. This may not be a choice for some homeowners because they are in a situation where they owe more on the home than it’s worth.
3. Sell and Cut your Losses. A great way to get rid of your monthly payment is to sell your home and cut your losses. If you have money in the bank to pay for these losses then this is an option. If your home is worth more than what you owe on the home, then this is a great option as well. This isn’t a great option if you owe more on the home than what it’s worth and you don’t have any money in the bank to pay for your losses.
4. Short Sale. Short selling your home in today’s market is the best way to cut your losses if you can’t do any of the above. A Short Sale consists of presenting your bank with a contract that is below market price and asking if they would be willing to accept the contract and close out your lien without putting a deficiency lien against you for the difference. With the way the market is going, banks are more likely to accept a short sale. A number of banks are dealing with a lot of foreclosures which consists of a lot of fees for a bank, so doing a short sale cuts out a lot of these fees. More than likely if they don’t accept a short sale it will result in foreclosure which is extremely costly.
5. Foreclose. Foreclosing on a property is probably the worst thing you can do. But if you have no other option, then foreclosing is definitely a way out. If you read my previous article about foreclosing than you know exactly why you shouldn’t. Your credit score will go down, it costs the bank a lot of money, and the bank has 4 years to put a deficiency lien against you which may cause you to be in the same position years down the road.
6. Bankruptcy. Bankruptcy is not a bad decision if you have no other way out and there is no light at the end of the tunnel. Filing a Chapter 7 Bankruptcy will wipe away all your debts and is basically be the end of the story. In today’s world it’s tougher to qualify for bankruptcy, you either need to have an income below the median income or you need to be qualified as insolvent. Either way, once you have qualified your creditors can no longer contact you and your assets will be divided between the creditors. The creditors can not put any lien against you and you are officially working with a clean slate. Only problem with this is your credit score drops dramatically and you’ll have a tougher time qualifying for credit cards, auto loans, and mortgages.
None of these decisions are something you want to make. But depending on your situation it may be something you have to make. As I’ve said before, I don’t reccomend you making a decision this big without first consulting an attorney or CPA. Every situation is different so contact someone who can review yours and help you make the right decision.
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January 23rd, 2008 at 11:46 pm
It is the human nature to find benefit wherever there is a chance. In loan market such an opportunity is provided by remortgage. Remortgage mean exchanging your present mortgage for a new mortgage. The basic idea behind is to save money by finding a better deal. Usually remortgage decreases the existing interest rate and thus saves your money. Sometimes you took a mortgage at high interest rate and with time the interest rate has decreased than you can go for remortgage to milk the benefits.
January 24th, 2008 at 3:02 pm
Hey I wanted to thank you for writing this incredible article. I\\\’ve been searching all over for info like this.
January 24th, 2008 at 4:47 pm
This is one of the worst articles I’ve ever read. For one, you should never start an option in the negative, 5. “Foreclosing on a property is probably the worst thing you can do.” And what’s with, “… in order for you to make the right decision you need to have no emotion.” These are people’s homes you’re dealing with here! Their lives and memories. And isn’t good business about building peronsal relationships?
Waste of my time.
January 25th, 2008 at 8:34 am
Hey Kim,
Sorry this was a waste of your time but every scenario is different. This article was written from an interview I had with a local Bankruptcy Attorney who deals with these types of situations everyday. Sorry you didn’t find the article helpful but please check back in the future.
Thanks,
Blake
January 25th, 2008 at 12:00 pm
I think Kim is missing the point. No one is saying you should not be sad if you lose your home. Of course you will. The point is that if you are evaluating a financial decision, it should be based upon the numbers. Housing options abound and you should not worsen a precarious financial situation because of emotions like “saving face” or “guilt”.
March 28th, 2008 at 3:35 am
good tips, thanks
April 14th, 2008 at 10:48 am
It is nice to find other who are offering up the options clearly. It is just distressing to see people just abandoning houses… bad for our neighborhoods and bad for our economy,
June 27th, 2008 at 10:04 am
Very good article, it shows that people can find solution even in such difficult situation. But they have to be very careful and not to do even worse. Foe example, people choose remortgages to get a lower monthly payment than they are currently paying, but very often they have hidden costs and then you pay even more. That’s why find out what interest rate you’re paying, then try to find a lower one with a different provider and you could reduce your monthly mortgage payments.
August 5th, 2008 at 7:51 am
Filing bankruptcy should be your last option. There are so many options available that can be taken advantage of.
And why get to the point of not being able to make the payments. Track your finance using free tools available online.
September 15th, 2008 at 1:39 pm
Hello:
Why would a chapter 13 be better than a chapter 7. I just spoke to someone at a lawyer\’s office and was told that it wasn\’t advisable to do a chapter 7. I tryed to make repayment arrangements with my morgage co. and they are not trying to be reasonable. I don\’t want to loose my house.
October 28th, 2008 at 11:10 am
Most people do not realize that they can stop foreclosure even if they stopped paying their mortgage. Many recent cases have been filed improperly and an experienced attorney can assist with the identification and filing of substantive and procedural defenses with the court and vigorously defend your case. Due to the lender’s actions, omissions or other facts surrounding your case, you may be able to stop making mortgage payments and stay in your home while your attorney vigorously defends your property. This does not necessarily mean that you will not have to pay the loan back or completely Stop Foreclosure. It is possible to completely Stop Foreclosure if the bank or lender is in violation of the Florida Unfair Lending Act or other predatory lending practices. If the lender has committed such a violation, the entire principal and interest balance may be waived and the mortgage may be voided. This may not be relevant in your case. But, at the very least, a successful defense can do is buy you precious time to:
* Stay in your home
* Negotiate a work-out with the bank
* Sell your home for a fair price
* Refinance your home at a fair rate
* Continue to collect rent on the property
* Apply for a Court Ordered repayment plan
* File a Chapter 13 or 7 Bankruptcy
When home owners are faced with the reality of facing a potential foreclosure, many experience a state of paralysis. They don’t know what to do. Selling the home may not be an option since the equity appears to have vanished. To fight foreclosure or not? That is the question. Clouding the answer is perhaps the biggest misconception, “Hiring an attorney is not a cost-effective option.” If I can’t afford to pay my mortgage, then how in the world can I afford to hire a competent attorney? And why should I, if I am upside down in my home? First of all, EVERYONE can and should hire an attorney to represent them in their foreclosure case. There are many competent attorneys who specialize in this area. Due to the growing number of these cases, many attorneys have become “experts” in this area. Due to the fact that most of these cases are very similar, many excellent attorneys have experienced staff and can offer extremely affordable payment arrangements. Most people don’t know that once the foreclosure proceeding has started, the bank will not accept any future mortgage payments - doing so may adversely affect their ability to foreclose on your property. Furthermore, the bank pays any delinquent real estate taxes and the insurance on the property. In summation, once the bank files a foreclosure lawsuit, most of the homeowner’s expenses are being paid by the bank (mortgage, taxes and insurance). However, as the legal owner of the house with full possession, you have all the rights associated with same including residing in your home, collecting rents on the property, etc. Imagine the “EQUITY” you can save / build, if you fight the foreclosure case for a year or more. The cost of qualified legal representation is a drop in the bucket compared to your typical home ownership overhead. Time is money and the real estate and financial markets are likely to turn around. The hiring of the right attorney will save you thousands of actual dollars, in addition to thousands in time value of money. Its really a no-brainer.
Respectfully,
Frederick A Neustein
http://StopForeclosureLawyer.com
January 22nd, 2009 at 6:26 pm
What about reverse mortgages? My husband will be 70 in May. We “sold” our house twice in the last three years but both sales fell through due to neighborhood resistance to development and a girls home. We don’t need money from evaporated equity, only relief from payments. We had planned to sell and downsize long before this. Last March our house and acreage appraised for $1,200,000 and we owe $750,000.
March 10th, 2009 at 1:06 am
Taking the right decision in these times is crucial, if you want save your long run. In my opinion, refinancing would be quite inapproprite at this moment but yeah I do agree with you regarding bankruptcy. I thought foreclosure has its cons and its better to avoid foreclosures, as you have rightly mentioned here. Re-instatement of the mortgage terms will definately help you avoid entering into foreclosure. Infact, you could
consider a mortgage modification, thus, making a permanent change in a single or few other terms of the mortgagor’s loan where both, the home owner as well as the lender are bound to follow it. Mortgage modification would involve lowering of interest rates and principal balance which would make it more affordable for the mortgagor. Am sure most mortgagors are willing to take such a step, in order to sit back and enjoy their cozy home enclosure for years to come!
May 29th, 2009 at 6:31 am
What about the option of getting another job?