Mortgage Help

What can I do if my mortgage payment increases?

If your payment resets on an adjustable rate mortgage, you have several options. You can continue to make the payment, you can refinance your mortgage, or you can sell your house and pay the mortgage off. If none of these options will work for you, you should call your lender as soon as you realize you have a problem and attempt to work out a solution. Lenders do not want you to default – they want to get paid. They will oftentimes work with you to reduce your payment and possibly the interest rate.

I can no longer make my mortgage payment. Help!

If you owe less than your house is worth, you may be able to refinance your mortgage to reduce your payment. Another option is to sell your house and pay the mortgage off. However, if you are upside down on your mortgage and owe more than your house is worth, you are in a difficult situation. Immediately call your lender and see what options are available to you. You will have much better results if you are proactive in dealing with the situation rather than avoiding it.

What help can my mortgage lender give me?

If your problem is temporary, your lender may suggest a repayment plan. They will work with your to structure your payments so that you will be caught up and current on your mortgage as soon as possible given your situation. The lender may also allow you to go into “forbearance” which will allow you to skip your payments for a few months. This is often offered to people who have lost their job but are actively looking for new employment. Once you find a new job, you may be required to make higher monthly payments for a period of time until you have caught back up.

The lender may be willing to grant a loan modification, which changes the terms of your loan. The loan may be modified from adjustable rate to fixed rate, have the interest rate reduced, have the payment changed, or the repayment term modified. This is similar to refinancing your mortgage.

What is “deed in lieu of foreclosure”?

You can offer to give your lender the deed to your property so that the lender can sell it. Lenders can refuse to allow you this option. And even if it is allowed, it will have a major negative impact on your credit and remain on your credit report for seven years.

What is “upside down”? What is a short sale?

You are upside down on your loan if you owe more than the house is worth. This is not a problem unless you need to sell your house. When you sell your house for less than it is worth, this is known as a “short sale”. You will be required to pay your lender the remaining balance on the loan at the time of sale. If you cannot afford this, your credit will be adversely impacted, and your lender will attempt to collect the balance from you. There will also be tax implications.

What is forbearance?

A lender may allow you to skip a payment or a few payments if you are the victim of a disaster, temporarily out of work, recently divorced, or ill/incapacitated. A forbearance is a temporary suspension of payments, and you will be required to make additional payments after your situation has been resolved until you are caught up on your mortgage.

What is foreclosure?

Foreclosure occurs when a borrower has defaulted on his mortgage. The lender evicts the borrower and sells the property. This has a major negative impact on your credit record. A foreclosure will stay on your credit report for seven years, and there will also be tax implications.

What are the tax implications of a short sale, foreclosure, and deed in lieu of foreclosure?

The IRS requires lenders to file form 1099 stating the amount of any deficiency balance forgiven or written off. The balance is treated as taxable income. You should consult a tax professional regarding your tax liability.

What if I declare bankruptcy?

If you continue to make the required payments on your mortgage, the lender will not foreclose on your property. However, the lender has a lien on your property and will be able to foreclose if you do not continue making monthly payments.