What You Need to Know About Mortgage Default
Even if you’re a financially savvy individual, life can always throw you a serious curveball. Layoffs, unexpected illnesses, losing a loved one: there are any number of life events that can lead to financial uncertainty. If such unfortunate circumstances have befallen your household, then it can be difficult for you to cover all of your bills, including your mortgage payment.
When you begin to miss mortgage payments, you risk defaulting on your mortgage. Worst case scenario, this can result in the loss of your house. While this can be an incredibly stressful event, there are ways you can plan to prevent a mortgage default. Here is what you need to know about mortgage default.
What Is Mortgage Default?
When the borrower on a home loan fails to consistently make their monthly principal and interest payments, mortgage default occurs. The negative consequences can be serious for the borrower.
Not only could you possibly lose your home and have your credit score significantly damaged, but there can be especially damaging long-term repercussions: mortgage default can increase your interest rate across any other debts, and seriously challenge your ability to get any future loans.
3 Ways to Avoid Mortgage Default
Mortgage default doesn’t happen instantly. While the prospect of a mortgage default can be stressful, there are several steps you can take to avoid it.
- Contact your lender. As soon as you know you’ll be unable to make a monthly payment, contact your lender immediately. The sooner you do this, the higher your chances of avoiding a mortgage default. Explain your situation, as many lenders are willing to work on solutions with their borrowers. Among these options is mortgage forbearance, which allows a reduction or pause in payments (which you will still need to repay).
- Contact the Department of Housing and Urban Development (HUD). If a forbearance isn’t offered to you, there are HUD counselors who can discuss possible options and mortgage default solutions. There may be a state or federal program available to assist you, as well.
- Inquire about a refinance. Should you qualify, a refinance can help you avoid defaulting on your mortgage. The refinance can act as a “reset” to a longer term with a lower monthly payment, which is more manageable for your budget.
Contact the Mortgage Professionals at Butler Mortgage
If you are worried about changing financial circumstances and concerned that you will not be able to make your mortgage payment, contact the professionals at Butler Mortgage. They will help you navigate the process and see what options are available to get you back on track, such as securing a new loan at a desirable mortgage rate.
For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in Central Florida. Let us help you find the right loan solution that fits your budgetary needs by calling 407-931-3800 or by filling out our free consultation form online.