I Missed a Mortgage Payment—What Now?
Let’s be real. Life happens.
Jobs come and go. Unexpected bills show up in our mailbox. And suddenly, despite our best intentions, we find ourselves falling behind on our mortgage payments.
In most situations, there is a light at the end of the tunnel. Here are four steps you can take today to get back in the good graces of your lender.
1. Check Your Mortgage’s Grace Period
Most lenders offer their borrowers a grace period. This is a buffer between when the billing cycle ends and when the payment is due. These terms vary by lender, but the typical grace period for mortgages is 15 days. If your mortgage is due on the first, you actually have until the 16th to pay your bill.
As long as you submit your payment before the end of the grace period, you normally don’t have to worry about late fees or a negative mark on your credit score.
2. See If You Can Apply for a Deferral
If you can prove to your mortgage lender that you’re experiencing a temporary financial hardship, you may be able to apply for a deferral. A deferral allows you to take a month (maybe two) off from paying your bills. You are still responsible for the money that’s due, but you get a little breathing room between payments.
This is best for homeowners who are experiencing a temporary setback. For example, you got hit with some unexpected medical bills or you’ve just started a new job after a period of unemployment.
But heads up: You can only defer mortgage payments on your primary residence. This program is not available for investment properties or vacation homes.
3. Have a Heart-to-Heart With Your Lender
Many banks and lending organizations offer borrowers the option to change the original terms of the mortgage via a process called loan modification.
This option is typically only available to homeowners who are experiencing significant financial hardships. Rather than defaulting or foreclosing on your home, the lender will work with you to reduce your monthly payments.
There are a number of loan modification options you can talk with your lender about, including:
- Principal reduction: Decreases the outstanding balance owed on your home. From the lender’s point of view, this is often less of a loss than going through the process of a foreclosure.
- Refinance: Replaces your current mortgage with one offering a lower interest rate. This is also a good option for homeowners who want to switch from a variable interest rate loan to one with a fixed rate—if you have good credit.
Should you refinance your home?
- Extend the term of your current mortgage: Gives you an extra 10 years to pay off your mortgage, increasing the overall amount of interest you pay, but it will also lower your monthly payments.
- Forbearance agreement: Like a deferral but on overdrive. You may be able to postpone your mortgage payments by up to a year. This option is generally only available to people experiencing a significant—but temporary—hardship. Say your home was damaged by a natural disaster or you can’t work for several months because of an injury or illness.
When it’s time for the conversation with your lender, come prepared. Depending on the loan modification program, you will likely have to demonstrate proof of your current financial hardship. This can include pay stubs, medical bills, and other documents. You may also have to fill out tax forms and agree to a trial period to prove you can afford the new, modified payment.
4. Access Your Home Equity
If you don’t want to change the terms of your current loan or your financial future is murky and you worry you may not be able to keep up with your payments (on top of other expenses), you still have options to gain control of your debt—and your life.
Unlike a traditional loan, a Home Equity Investment from Hometap comes with no monthly payments or interest, allowing you to pay down your debt without taking on more debt. Instead, Hometap allows homeowners to tap into the cash they need today in exchange for a share of the future value of their homes.
In fact, more than 50% of all Hometap Investments go to homeowners looking to consolidate or pay down financial burdens.
Take our 5-minute quiz to see if a home equity investment is a good fit for you.
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The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.
Hometap is made up of a collaborative team of underwriters, investment managers, financial analysts, and—most importantly—homeowners—in the home financing field that understand the challenges that come with owning a home.