What Happens If I Can't Pay My Mortgage Anymore?

Real estate agent greeting couple at house
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Buying a home is a big commitment, and it locks you down not only to a specific locale, but also to monthly mortgage payments—often for decades to come. Falling behind on those payments is a bit different than not paying your rent because it can have a bigger effect on your credit score. It can also put your home in jeopardy if you can’t settle up.

What Happens When You Fall Behind on Your Mortgage

If you cannot make your payments, a few things can happen. First, you’ll be charged a late fee once you’re 15 days behind. If you’re still unable to make your payment after 30 days, your loan will officially go into what’s called “default.”

At this point, your lender will report your overdue payment to credit bureaus, and it will start to impact your credit score. 

Finally, once you’re 120 days or more past due, the foreclosure process will begin. This is when the lender takes control of the home and removes you from the property. Though the actual legal process for this varies by state, the goal is for the lender to sell the property, using the proceeds to pay off the remaining mortgage balance.

It may sound like the solution to the problem because you no longer live at the home. However, this does not mean that you are not responsible for the remainder of the loan. Generally, the banks will sell the property, and if the proceeds don’t cover the full loan balance, you could be required to pay the difference. This is called a “deficiency judgment” and requires additional legal action on the part of your lender.

Mortgage lenders offer a grace period on monthly payments. You typically have until the 15th of the month to make your payment without incurring any late fees or penalties.

Options if You Can't Make Your Mortgage Payments

If you are having a difficult time making your payments, you should contact your mortgage company right away to see if there are any programs that may be able to help you. You may be able to qualify for a temporary payment reduction or to refinance for a lower payment depending on where you live and if you are past due on the loan or not.

You can also meet with a HUD housing counselor. They can help you determine the best course of action, as well as assist with budgeting and other financial needs.

Here are some other options:

  • A forbearance plan - If you’re dealing with a temporary hardship, this allows you to make reduced payments (or sometimes no payments at all) until you’re back on your feet. 
  • A modification - Your lender may be able to modify your loan in order to make payments more affordable.
  • A deed-in-lieu of foreclosure - This allows you to hand over ownership of your property to the lender in exchange for total or partial debt forgiveness.
  • A repayment plan - These are designed for borrowers who are a few payments behind. They allow you to pay a higher monthly payment until you’re caught up on your past due balance.
  • A short sale - A short sale lets you sell the property yourself, and then give the proceeds to your lender. These are only options if your mortgage balance is higher than your home’s current value.

In addition to asking the bank for help, you may need to find ways to increase your income. Taking on a second job or side gig can help. If it is a temporary income issue, like losing your job, working a few temporary jobs can help you stay in your home and avoid falling behind. Getting a roommate may also be an option depending on your circumstances.

A refinance may be able to help if you can’t make your payments. If you refinance into a longer-term loan, you can lower your monthly payment. Keep in mind this does increase the amount of interest you will pay over the life of the loan.

How to Prevent Falling Behind in the First Place

The best thing you can do is make sure you’re financially ready to buy a home. This means:

  1. Saving up for a down payment. A solid down payment gives you equity in your home from day one. This keeps you from owing more than your home is currently worth later on down the line.
  2. Reducing your debts. Paying down credit cards, student loans, and other debts frees up income and makes it easier to manage your house payments. 
  3. Only purchasing a home that you can really afford. If you stretch yourself too thin, you may find yourself overwhelmed by your house payment—especially if your income changes or an emergency crops up that requires extra funds.

You should also consider how long you plan to stay in the home. If you are buying a starter home, you may plan on upgrading in a few years. If you are in a profession that requires you to move frequently, you need to take that into consideration as well. 

Generally, you need to be able to stay in your home for at least five years to break even on the purchase. Always remember: it's important to buy a home only when you're financially ready—not because other people are pressuring you to do so

Article Sources

  1. Consumer Financial Protection Bureau. "Homeowner's Guide to Success," Page 2. Accessed November 18, 2019.

  2. Consumer Financial Protection Bureau. "I Can't Make My Mortgage Payments." Accessed November 18, 2019.

  3. Consumer Financial Protection Bureau. "How Does Foreclosure Work?" Accessed November 18, 2019.

  4. Consumer Financial Protection Bureau. "Brief of Amicus Curiae Consumer Financial Protection Bureau in Support of Plaintiff-Appellant and Reversal," Page 5. Accessed November 18, 2019.

  5. Consumer Financial Protection Bureau. "What is Mortgage Forbearance?" Accessed November 18, 2019.

  6. Consumer Financial Protection Bureau. "What is a Mortgage Loan Modification?" Accessed November 18, 2019.

  7. Consumer Financial Protection Bureau. "What is a Deed-in-lieu of Foreclosure?" Accessed November 18, 2019.

  8. Consumer Financial Protection Bureau. "My Lender or Servicer Said I Could Go On a Repayment Plan." Accessed November 18, 2019.

  9. Consumer Financial Protection Bureau. "What is a Short Sale?" Accessed November 18, 2019.

  10. Redfin. "How Much Do I Need to Sell My House for to Break Even?" Accessed November 18, 2019.