What happens if you can't pay your mortgage?
What happens if you can't afford your mortgage payments?
First, take a deep breath. You are not alone.
Second, speak with your bank or other financial institution and explain your situation clearly as soon as possible. Often, the bank will come to some sort of temporary arrangement to accommodate your needs. The bank may agree to reduce or postpone a few payments.
If you cannot reach an agreement with your bank and you are unable to make your payments, the lender will begin taking legal action on your property.
What about a 2nd lender?
If you have equity in your home, there are several private lenders who may be willing to lend you money if you have enough equity. However, the interest rates are usually between 12% to 15% plus a substantial borrowing fee.
What about selling it?
If you have already defaulted on your mortgage, but are not yet in complete foreclosure - you still may be able to sell your home and keep any equity you made. Talk with your bank and let them know that you are trying to sell your property. They may put a hold on the foreclosure process for you. Sometimes it is better to give up that dream home, downsize temporarly and breath!
Can you give it back to the bank?
If your home is not worth more than your mortgage loan and you cannot make your payments, you may want to consider walking away from the home under a “quit claim deed.” If your mortgage lender agrees, you may be able to transfer title of the house to the lender in return for a complete release of all your obligations. The lender then becomes the full owner of the property.
What happens when the bank sells your house?
Don't expect to retrieve the equity you originally had in your property. It costs Banks time & money to sell your house. Some of these expenses will be for court orders, property maintenance, legal fees, etc.. If these costs are higher than your original equity,(& usually are) you are still liable for the difference.
If you stop paying your mortgage payments and do not make other arrangements with the lender, it will likely begin legal action to take possession of your home. Whatever your problems, it is always a good idea to advise your lender and request a temporary solution until you become more financially stable.
Contact us to learn the value of your home and how long it would take to sell in today's real estate market?