Sometimes, missing a mortgage payment is unavoidable — or it might be an honest mistake. In any case, you need to know what your options are in the event of mortgage delinquency to prevent foreclosure and other negative outcomes. Let’s take a closer look.
When you miss one of your payments or don’t make a large enough payment to your mortgage lender, you enter a mortgage delinquency period. A delinquent mortgage is one that’s not balanced – you either missed one or more payments or, even though you made one or more payments, you did not pay both the minimum principal balance plus the accumulated interest.
A mortgage is considered delinquent whenever any scheduled payment is missed (either entirely or by the correct amount). However, mortgage delinquency is not the same thing as foreclosure.
In most cases, when your mortgage goes into delinquency, your lender will send you a letter or email alerting you of the missed payment. They will tell you that your mortgage is delinquent by a certain date, and explain exactly how much money you owe.
When you receive this notice, think of it as your mortgage lender telling you that you are now entering the first stage of pre-foreclosure. That sounds scary, but it's not necessarily a disaster, especially if a minor mix-up contributed to the delinquency.
For example, say that you switched debit card providers or had to get a new debit card because of identity fraud troubles. When your mortgage lender tried to automatically charge your debit card to make your mortgage payment, the attempt was denied.
In this way, you accidentally put your mortgage into delinquency. But once your lender alerts you to this fact, it might be a simple matter to set up auto payment once again with the new debit card under your name.
However, if you do not resolve the mortgage delinquency quickly, the pre-foreclosure process can proceed. Your lender will follow up with multiple warnings to ensure that you are aware of the delinquency. Eventually, once a certain amount of monthly payments have been missed without resolve, the lender will start foreclosure.
Because of this, it’s a good idea to resolve any mortgage delinquency ASAP.
Luckily, there are several ways in which you can catch up on your mortgage. Whenever you try to resolve mortgage delinquency, stay in constant contact with your lender. They know what's going on, what you owe, and what you can do to resolve the matter as quickly as possible.
Your first solution is to simply pay your mortgage lender whatever you owe them. For instance, if you missed a mortgage payment of $940, simply send a check to your mortgage lender for $940 right away, in addition to any associated fees or expenses that might be tacked on.
This is the best solution if your mortgage went into delinquency because of a simple mistake on your part, like the above-mentioned mix-up with debit cards. Even if it wasn't a mix-up, and you simply needed to wait a few extra days to get paid and make your mortgage payment, you can still send your lender what you owe without too much trouble.
However, don’t make this a habit; any missed mortgage payment can negatively impact your credit score.
Alternatively, you can work with your lender with a variety of strategies and methods, including:
If those other solutions fail, you can try to sell your property. If you sell your home quickly enough, you can recoup some or all of your costs and escape with minimal damage to your credit score.
However, your mortgage lender will still expect you to make mortgage payments while you are selling your property. Keep this in mind. If you don’t have enough money to make one mortgage payment, you may not have enough money to make mortgage payments for several months while you sell your house.
Alternatively, you can pursue a home equity investment. In a nutshell, a home equity investment has a co-owner, like Balance, pay off your home’s remaining mortgage balance. In exchange, the home equity investor takes out an equity investment in your property. You’ll often receive a sizable lump sum of cash for the equity you’ve built up.
With a home equity investment, you don't have to move. You retain ownership rights on the deed, and you only need to make a monthly payment to the co-owner of your property to cover maintenance and taxes. In the meantime, you can use the extra money freed up from no longer having to make mortgage payments to pay down your debt or to otherwise stabilize your financial situation.
Because of these benefits, home equity investments are some of the best solutions to mortgage delinquency. A single home-equity investment could prevent mortgage delinquency from spiraling out of control, eventually leading to foreclosure.
As you can see, mortgage delinquency doesn’t necessarily spell the end of your homeownership. In fact, Balance can help you keep your home and avoid future mortgage delinquency by co-investing in your property.
With Balance, you’ll receive cash for a share in your home's equity, plus you'll have the option to buy out our equity share and take full ownership of your home once again later down the road. Contact us today to learn more.
Sources:
Delinquent Mortgage: What it Means, How it Works | Investopedia
What Is Pre-Foreclosure? | Experian
What is a deed-in-lieu of foreclosure? | Consumer Financial Protection Bureau
Learn about forbearance | Consumer Financial Protection Bureau
