How to Protect Your Home During Financial Difficulties

Financial difficulties can happen to anyone. Unexpected medical bills, job loss, and more can drastically change your financial situation over night. When this happens, a mortgage that was once easy to pay can become an impossible expense. There is nothing more scary than the fear of losing your home. Luckily, when financial difficulties arise, there are things you can do to protect your home and keep the roof over your family’s heads.

Recognize the Warning Signs Early

The most important thing you can do is recognize the warning signs early. Foreclosure often happens to those who ignored the warning signs until it was far too late to act. Warning signs include:

• Missing or struggling to make mortgage payments
• Relying on credit cards to cover essential expenses
• Falling behind on other bills
• Receiving late payment or default notices

Keep an eye out for these warning signs. When you start noticing any of them, it is time to start taking action. Noticing the warning signs can be the difference between keeping your home and losing it to foreclosure.

Review Your Financial Situation

Once you notice the warning signs, the first thing you should do is review your financial situation. The first thing to do is calculate monthly income and expenses. This will show you whether or not you truly can’t afford all of your financial obligations. Next, identify non-essential spending that can be reduced. Many people find that once this is done, they actually can afford their mortgage payments. Finally, you can determine exactly how much you can realistically afford toward your mortgage. This number is important. You will need it when you contact your mortgage lender.

Contact Your Mortgage Lender

You should contact your mortgage lender immediately. The sooner you do, the more lenient they are likely to be. Don’t wait until you’re several months behind. Contact them before you even miss a payment if possible. When you contact them, explain your financial hardship honestly. You can then ask about available assistance programs. You may be surprised by how flexible mortgage lenders can be. However, it is important that you keep records of all communications. Mortgage lenders are often huge companies with hundreds of employees. This means that things can easily slip through the cracks. If they offer you leniency, you want to make sure you have a record of it.

Explore Mortgage Relief Options

After speaking with your mortgage lender and seeing what they have to say and offer, it is time to consider the different mortgage relief options. These include:

• Loan Modification: This is when the lender agrees to permanently change loan terms to create a more affordable payment for you.
• Forbearance: This is when the lender agrees to temporarily pause or reduce payments during financial hardship. This can give you a few months to improve your financial situation.
• Repayment Plan: This allows you to make monthly payments on your past due mortgage payments. However, you must continue making your regular payments.
• Refinancing: Refinancing can lower your interest rate, lowering your monthly payments. Doing this will depend on the current market conditions.

All of these are options worth considering. Which one is the right choice will depend on your specific situation and your preferences.

Avoid Common Mistakes

To ensure that you truly protect your home and don’t risk losing it again in the future, it is important that you avoid common mistakes. These include:

• Ignoring lender communications
• Waiting too long to seek help
• Falling for foreclosure rescue scams
• Draining retirement savings without exploring other options
• Taking on high-interest debt to cover mortgage payments

If you avoid all of these, you will have a good chance of protecting your home for years to come.

Stopping Foreclosure with Chapter 13

If none of the previously mentioned options will work for you, there is always Chapter 13 bankruptcy. This will immediately stop the foreclosure process or prevent it from happening. Chapter 13 basically rolls all of your debt into one. A repayment plan will be made in which you make monthly payments for 3-5 years. These payments are dispersed to creditors, including your mortgage lender. If you choose to go this route, it is vital that you hire a Chapter 13 bankruptcy lawyer. They will guide you through the entire process and make sure your bankruptcy is a successful one that sets you up to rebuild your financial health.