Catching up on Your Mortgage Payments

two small wooden houses lay on top of a notice of the intent to foreclose

 Busà Photography / Getty Images

Are you behind on your mortgage payments? Try not to panic—you have options. From forbearance to principal reduction to refinancing your loan, there are steps you can take when you find yourself in this difficult financial situation.

Remember, if you become a delinquent borrower and are falling behind on your house payments, it’s important to take action as soon as possible. Don’t ignore the problem, and don’t ignore letters and calls from your mortgage lender, either. This will only make the problem worse.

It’s in your best interest to avoid foreclosure, as it can have serious impacts on your long-term financial health. Read on for five tips to get caught up on your mortgage and avoid foreclosure.

1. Forbearance

If you have student loan debt, you’ve probably heard the term forbearance. But did you know it can also apply to your house payments?

A forbearance is an agreement you’d make with your mortgage lender to temporarily suspend mortgage payments after both parties agree on a payment plan to eventually bring your account up-to-date. If your lender agrees to forbearance, it means they will also forgo the right to pursue foreclosure, which is a good thing.

2. Lump-Sum Repayment

This option is probably not realistic for everyone, but it can solve the problem. If you find yourself behind on your mortgage payments and in danger of foreclosure, you can pay a lump sum to your mortgage lender to bring your account current.

But this requires a big chunk of money down, so it may not work for your financial situation.

3. Principal Reduction

Another good option if you find yourself in danger of losing your home is to ask your lender for a principal reduction. This means they would agree to a lower principal amount owed in order to help you avoid foreclosure.

You may be wondering why a lender would agree to this.

In short, it’s more cost-effective for them to agree to a lower balance owed than to move forward on a foreclosure on your home, which can be a costly process. So use that to your advantage.

If you are underwater on your home—which means you owe more on the property than what it’s worth—then they may be even more willing to agree to a principal reduction.

4. Lower Your Monthly Payments

When you first qualify for a mortgage, you often agree to other payments rolled into the amount, such as property insurance, local taxes, and private mortgage insurance (PMI).

See if you can lower one—or all—of these add-ons. For example, if you own at least 20% equity in your home, you should be able to stop paying Private Mortgage Insurance (PMI). This can help lower your payments substantially.

5. Refinance Your Loan

Refinancing can be another potential solution. If you are able to refinance your current loan, it will bring you current on your payments, which will avoid foreclosure.

Another bonus? You can use refinancing an opportunity to lower your payment to one that’s more affordable, which can help you avoid this situation in the future.

Other Options to Avoid Foreclosure

If you find yourself in danger of foreclosure, it’s important to know your legal rights. Dig out your mortgage paperwork and read it with a discerning eye, especially the section on foreclosure. It should explain what your lender can—and can’t—do in this situation.

Another resource that may be helpful in helping you get back in the black is the U.S. Department of Housing and Urban Development (HUD), which offers low-cost housing counselors. They can help you navigate the process. You should also avoid foreclosure relief companies, as they may not have your best interests at heart.

Declaring bankruptcy is another option. While it won’t stop foreclosure indefinitely, it will postpone it and may give you time to get caught up.

But do your research on the long-term effects of declaring bankruptcy, as it can also negatively affect your financial future.

Lastly, examine your other assets. Do you own anything of worth that you could sell and use to get up-to-date on your mortgage? Jewelry, antiques, and even family heirlooms could help you find your way out of a mortgage mess. And if none of the above options are realistic for you, then you may want to consider hiring a foreclosure attorney.