When your financial circumstances change and you find yourself in a difficult situation, you may be faced with the possibility of defaulting on your mortgage. What can you expect if this happens?
When you have missed your first payment, your lender will most likely send you a letter regarding the late payment and this usually incurs a late payment fee and a processing fee. It is important at this stage to contact your mortgage lender to explain your situation and find an alternative option. However, if you don’t contact your lender and allow your mortgage payment to be more than 90 days late, the lender will initiate foreclosure proceedings to repossess your home. This means that your house is in the repossession stage and you are no longer entitled to it. In an attempt to save your property, first set up discussions with your mortgage lender to see what options are available, and even consider hiring a good attorney for loan renegotiations. A good lawyer with experience in recovery cases will know the ins and outs of these types of cases and will help you determine what is the best option for him. In most cases, your lender will be happy to try to renegotiate the situation until you get back on your feet. Do it before it’s too late and you end up incurring additional charges.
Aside from the risk of losing your home, one of the main consequences of defaulting on your mortgage loan, as with any other loan agreement, is the negative effect on your credit history. It takes years to build good credit, and defaulting on your mortgage, particularly to the point of foreclosure, can cause you a lot of trouble for future financing. This includes not only future mortgage applications, but also financing for a car, credit cards, store credit, and any and all applications for credit. A bad credit rating can ruin your credit rating for many years.
The best way to prevent things from getting out of control is to avoid default and, in particular, foreclosure at all costs. One way to do this is to not take out a mortgage beyond your means. As a guide, when purchasing property, make sure it requires no more than 40 percent of your monthly income. It’s also a good idea to have at least three months’ worth of mortgage savings stored as a backup, in case of trouble. Consider purchasing an accident and injury or loss of income insurance plan to cover any serious situation.
Remember to talk to your lender if your payments are becoming too difficult for you. Consider looking up a refinance mortgage rate and shop around for the best home loans available. This may involve switching companies, so shop around for the best mortgage refinance company available. There are many companies that can take over your loan and offer you a lower monthly payment rate. However, remember to check carefully and don’t let desperation cloud your judgment or allow you to make rash decisions.