Marylanders know that owning a home usually requires shouldering the responsibility of mortgage payments. However when faced with financial difficulty due to unemployment, loss of income or a medical emergency, making a mortgage payment on time becomes an uncertainty. Homeowners are then faced with the prospect of losing their homes to foreclosure.
However, a homeowner can take steps to avoid foreclosure if faced with financial issues. Most mortgage companies want to avoid foreclosures because they are time consuming and can lead to additional costs, so communication with a mortgage holder may yield other options.
Although using retirement savings to make mortgage payments is a tempting alternative to foreclosure, it is not advisable to use these funds unless the financial crisis may be short in duration. The first step should be to take stock of the finances available to make mortgage payments. Account statements for the last three months can help provide insight into monthly expenses. A detailed accounting of where income is being spent is very helpful in identifying where expenses can be reduced or controlled. Also any funds set aside for trips or discretionary spending might be used, if available.
After analyzing existing finances, a homeowner can try to negotiate an affordable payment plan by requesting that the mortgage be modified to a longer payment period or a lower interest rate. A mortgage borrower should also be aware that various scams exist to exploit a bad financial situation so professional advice might be sought regarding these matters.
The correct advice may help a homeowner choose from refinancing or a short sale in lieu of foreclosure. In case none of these options are viable, a Chapter 13 bankruptcy filing may be possible and may allow a homeowner to keep the house while debts are paid through a court-ordered repayment plan.
Source: Forbes, “How to Avoid Foreclosure Before It’s Too Late,” Liz Davidson, June 5, 2012