If you’ve fallen behind on mortgage payments, it might feel like you’ll never catch up. Fortunately, there are resources and options available to you to help you make up missed payments and make future ones more manageable. Let’s take a look at three ways you can catch up on mortgage payments.
#1 Catch up on Mortgage Payments With a Repayment Plan
One way you can catch up on mortgage payments quickly is to pay back the missed payments. There are a few ways you can do this. You can either pay the owed amount in a lump sum, or spread out the payments with a specialized plan.
Add a Missed Mortgage Payment to Your Next Bill
If you’ve only missed one or two payments, you can add them to the next payment and catch up on mortgage payments right away. This will include the total of skipped payments and any associated late fees. If paying in a lump sum isn’t an option you can do, you can talk with your lender about a repayment plan.
Work With Your Lender to Create a Repayment Plan
To set up a repayment plan, you will meet with a representative from your lender to discuss spreading out the missed payments over a period of time to help you pay them off. If you can stay current with your next payments, you’ll be able to make up the missed ones. Depending on how many payments you’ve missed, you could have the repayment period last a few months or longer.
These options might be right for you if your income was temporarily reduced. Once your income is back at the normal level, you’ll be able to afford your usual payment. The downside to this option is that you have to be able to pay a larger amount than your normal payment, either all at once or over a few months. In order for a repayment plan to be effective, you have to understand your financial situation and be able to plan for the near future until your account is current again.
#2 Modify Your Loan to Catch Up on Mortgage Payments
Similar to refinancing, loan modification can help you catch up on missed mortgage payments and reduce future ones. In loan modification, you file an application with your lender to explain a recent financial hardship. If accepted, your lender can adjust the terms of your current loan agreement, extending the length of the loan for a lower interest rate or smaller monthly payments. Loan modification also brings you current with your payments.
Refinancing, on the other hand, replaces your old mortgage with a new one. New terms can help you get a lower interest rate, reduce your monthly mortgage payments, and save you money in the long term. If you have missed mortgage payments, you may be disqualified from refinancing your loan. Some lenders may be willing to discuss refinancing if you catch up on mortgage payments first.
#3 Reduce Mortgage Payments with Principal Reduction
One way to make your mortgage more manageable is through principal reduction. Reducing the principal of your loan reduces the amount you owe. A smaller principal can reduce your monthly obligation so it’s easier to catch up on mortgage payments. To make a case for principal reduction, you will need to prove that your home is a lower value than when the mortgage was first assigned. This method involves underwriting and a lot of paperwork, but your lender might consider it to avoid foreclosure.
Many homeowners were able to reduce the principal of their mortgages after the financial crisis of 2008-2009. Now that we’re on the brink of a new recession, if you have experienced financial hardship, this might be an option for you. Not all lenders will do principal reductions, but some might be flexible in reducing the interest rate. Talk with your lender to be informed about your options.
Creative Solutions to Catch Up on Mortgage Payments
If you still can’t get your lender to reduce your monthly payments, you might consider other ways to save monthly costs to divert to your mortgage. This could include adjusting your insurance payments, inquiring if you’re eligible for property tax abatements, or finding local organizations to help defer payments and prevent foreclosure.
Don’t wait too long to find a solution if you need to catch up on mortgage payments. The further you get behind, the more difficult it will be to get back on track. There are resources out there designed to help homeowners like you get out of troublesome debt and get current with their mortgage — you just have to be willing to seek help.
If you’ve fallen behind on mortgage payments, and just aren’t sure how to catch up, talk to the team at Renewed Homes. We’re always working to develop creative financial solutions that can get you out of debt, and back on your feet.
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