What to Do if You’re Over Your Head
Has your mortgage payment become too large for comfort? If so, take swift and informed steps toward resolution:
- Identify the shortfall. Subtract the total of your monthly expenses from your monthly income to get an exact figure for the shortfall. This will be the amount of money you will try to make up with budgetary changes so you can pay your mortgage as agreed.
- Explore budgetary changes. How can you close that deficit? Look to increasing your income with a second job, part-time employment, adding work hours, or having a family member contribute to the income pool. Carefully examine your expenses and pinpoint areas where you can cut down to free up cash. Be realistic with what you can and cannot do. You may be able to sell some assets to meet the shortfall for a few months, but what about after that? Plan for a long-term solution.
- Contact your lender. If you are unable to regularly make your mortgage payment by adjusting your cash flow, contact your lender immediately. Be ready to review your financial situation in detail. When speaking with your lender, be honest and clear about your desires and abilities. Never promise something if you cannot follow through.
- Be open to solutions. You and your lender will discuss ways you can keep the home, which may include changing the loan’s terms to reduce the payment, making lower or no payments for a period of time, or refinancing the loan. None of those solutions work? Consider selling the home or deeding it back to the lender. If it is worth less than the loan balance, you may be able to sell it for its current market value. Ask about the benefits and drawbacks of each option before making a decision.
- Take action. Whatever you decide, don’t wait with what you need to do. For example, if you gave your word that you will be back on track in three months by getting a second job, do so. If you know that it will be impossible to afford your mortgage payment, find another living situation now, and take steps to sell the home or deed it back to the lender before the foreclosure process begins. Delaying action will waste precious time and money.
Source: Balance Financial Fitness
