When your financial circumstances change and you find yourself in a difficult situation, you may have to face the possibility of defaulting on your mortgage. What can you expect if this happens?
When you’ve missed your first payment, your lender will most likely send you a letter regarding the late payment and this typically incurs a late payment fee and a processing fee. It is important at this stage to contact your mortgage lender to explain your situation and find an alternative option. However, if you do not contact your lender and allow your mortgage payment to be delayed for more than 90 days, the lender will initiate foreclosure proceedings to repossess your home. This means that your house is in the repossession stage and you are no longer entitled to it. In an attempt to save your property, first arrange discussions with your mortgage lender to see what options are available and even consider hiring a good attorney for your loan contract renegotiations. A good attorney with experience in recovery cases will know the ins and outs of this type of case and help you determine what is the best option for him. In most cases, your lender will be happy to try to renegotiate the situation until you recover. Do it before it’s too late and you end up incurring extra charges.
Aside from the risk of losing your home, one of the main consequences of defaulting on your home loan, as with any other loan agreement, is the negative effect on your credit history. It takes years to build good credit, and defaulting on your mortgage, particularly to the point of foreclosure, can cause you many problems with future financing. This includes not only future mortgage applications, but also auto financing, credit cards, store credit, and any and all credit applications. A bad credit rating can ruin your credit rating for many years.
The best way to prevent things from getting out of hand is to avoid default and, in particular, foreclosure at all costs. One way to do this is to not take out a mortgage beyond your means. As a guide, when buying a property, make sure it requires no more than 40 percent of your monthly income. It’s also a good idea to have at least three months’ worth of mortgage savings stored as a backup, in case of difficulties. Consider taking out an accident and injury or loss of income insurance plan to cover any serious situation.
Remember to talk to your lender if your payments are becoming too difficult for you. Consider shopping around for a refinancing mortgage rate and shop around for the best home loans available. This may mean changing companies, so shop around for the best mortgage refinancing company available. There are many companies that can take over your loan and offer you a lower monthly payment rate. However, remember to check carefully and don’t let despair cloud your judgment or allow you to make hasty decisions.
