Home ownership is one of the most significant achievements in the average person’s life. However, it’s also one of the most difficult to actually attain. For one, the average American earns about $56,516, according to the latest census data. On the other hand, the median home price in the United States is about $284,600. Even if a person somehow saves up all their paychecks in a year, they still can’t afford to buy a home in full.
For an average person like you, getting a mortgage is your only choice of homeownership — even if you’re planning to buy housing that’s low-cost. A mortgage is supposed to help you pay for your home by spreading it into monthly payments with interest. However, even those fees may be difficult to pay. This is especially true if you’ve been furloughed or your business isn’t doing well this pandemic.
If you can’t pay for your mortgage’s monthly fees, you break the terms of your loan contract and go into default. There are two things that will likely happen when you go into default:
When you fail to pay your monthly fees, your lender may ask you to pay your outstanding balance in full. Whether this can be done depends on your mortgage contract.
If you go into default and you still can’t pay your mortgage fees nor your outstanding balance, your lender may foreclose your home. Foreclosure involves your lender taking possession of your property if you fail to fulfill your repayment duties.
How to Keep Up With Your Mortgage
Losing a home, especially during these difficult times is the last thing anyone wants to happen. If you think you’re in danger of going into default, here’s what you can do to avoid it.
Negotiate for forbearance
Some lenders may throw you a bone and offer forbearance on your mortgage. This means you’ll go into a legally binding agreement where your lender will postpone foreclosure to give you a chance to resume your mortgage payments. You’ll also be required to pay the fees you missed in the previous months. This is recommended for people who are sure that they’ll be able to bounce back and have the income they need in the coming months.
Modify your mortgage
If the terms of your loan payments are too difficult for you, you can always get it modified to get the relief you need. Loan modification involves changing the terms of your loan without altering the loan itself. You can lower your monthly fees for a lengthier loan duration. You’ll pay more in the long run, and you’ll also be paying for your home for longer, but it’ll be more manageable. There’s also the option to change your mortgage type. If you’re having trouble paying with a fixed interest, you could switch to an adjustable rate. If the market conditions are right, you could pay lower than what you’re paying for right now.
Sell your house
If you’ve exhausted all your options and you still find it hard to pay for your mortgage, it’s alright to throw in the towel and sell your house. You have two options: a traditional sale or short sale.
In a traditional sale, you sell your house for the value you got it for, or more if you made improvements to it. When you finally sell your home, you use the money to pay off your remaining mortgage amount, your closing costs, and other loans related to your home. If there’s money left after your payments, you get to keep them to buy or rent your next home.
The problem with a traditional sale is that it may take a few months before you get to sell your house. If you’re looking for a quicker way to make a buck, do a short sale. This involves selling your home on the market quickly but at a lower price. The downside of this is that you need to get permission from the mortgage company, as it’ll result in a loss for them. You won’t get profit from this as you would in a traditional sale. All the proceeds will go toward your loan payments.
For a lot of people, getting a home loan is their only realistic option for owning a home. However, even mortgages can be challenging to pay off, especially during the health crisis the world is in these past few months. If you’re worried about missing one too many monthly payments, use these suggestions to ease your loan terms. You may have to pay for your mortgage for longer or sell your current home, you’ll rest easy knowing you’re in full control of your debt.