Three Ways to Protect your Mortgage in Difficult Times
If you are among the Americans affected by the struggling economy, you may be wondering how you’re going to cover larger expenses like mortgage payments. The first step to minimize financial fallout is to be open and honest with your lender. They want to help you keep your home and pay off your mortgage just as much as you do and will work with you to find mortgage loan protection options until you can get back on your feet.
Create a budget and look for ways to save money
If you find yourself facing financial problems, the first step is to tighten up your household budget and look for ways to earn money wherever you can. Write down how much money is coming in, how much is already committed to other payments and what changes you can make to increase income or reduce discretionary spending. Then make a plan to manage your deficit and encourage the entire family to stick with it. Deposit any savings into an interest-bearing account to grow your funds and have access when you need to contribute to the mortgage payment. You may also want to try to find a second source of income, such as a second job or selling items in a garage sale or on eBay?
Consider mortgage payment programs for home loan protection
After cutting back your spending, consider mortgage payment programs from your bank. Present your lender with documents highlighting your current income, expenses, home equity and current credit score and take advantage of their expertise to find a mortgage payment plan that will work best for your situation.
- Reinstatement: If you haven’t been able to make your mortgage payments due to temporary financial expenses like college or medical bills, you may be able to choose a future date with your lender to pay off the past-due amount in full. This includes interest, late fees and any other penalties accrued during the time you weren’t making payments.
- Repayment plan: If you’ve only missed a few payments, work with your lender to restructure your past-due mortgage payments into future payments. If you have been experiencing hardship but now have a job and are back on your feet, a repayment plan would allow you to catch up on payments without repaying everything at once.
- Forbearance: If you’re out of work or earning a lower income and know your period of financial instability will be short lived, consider a mortgage protection option that puts your payments on hold or reduces them for a set period of time to protect you from foreclosure.
- Modification: Similar to a refinance, a mortgage modification is a long-term solution, which changes the original terms of your mortgage, such as the payment amount, length of loan and interest rate. This could help reduce your monthly payment to a more manageable amount.
Refinance with government home loan protection options
If you’re able to prove you’ve done everything within your means to protect your mortgage, you may be able to qualify for government-assisted refinance options. The Making Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) provide support for a homeowner whose loan is backed by Fannie Mae or Freddie Mac. However, the HOPE for Homeowners (H4H) program is designed to provide home loan protection for all home owners through refinance opportunities. If you cannot get a standard refinance from your lender, see if you qualify for any of these mortgage protection options.
Avoid foreclosure with mortgage payment protection
When you face financial difficulties, an emergency savings account could help cover your expenses for a short period of time. However, it’s a good idea to speak to your lender about mortgage protection options to help get you back on track. If they cannot set you up with mortgage payment protection, you may qualify for government refinance options to make your monthly mortgage payment more manageable.