If you have a current mortgage and you suddenly lost your job or your source of income, you surely are in trouble. Aside from making ends meet for your daily necessities, you have to find ways to continue repaying your home loan. That will be a big challenge especially if you are certain you cannot afford to shoulder your monthly mortgage repayment anymore.
It is a must to avoid falling into a default. Aside from possibly being evicted from your own home, you will not like its long-term effect on your credit history. Try to prevent it from happening. Here are four effective ways to do so.
1. Contact your mortgage provider.
If you are having difficulties repaying your mortgage regularly due to some unexpected instances, contact your home lender. Banks usually do not like foreclosing properties because the process is tedious, costly, and long. You can be sure your mortgage lender can offer other options or solutions to help you avoid possibly defaulting on your loan. It may offer to extend your mortgage term to lower required monthly payments, to set up a new repayment plan to adjust payment amounts, or to allow interest-only payments for a short term. Weigh the pros and cons of each possible solution.
2. Consult a financial advisor.
An overwhelming situation may call for the expertise and guidance of an accountant or financial consultant. It will not hurt you to admit to yourself that you need help. The expertise of a financial advisor will give you ideas on potential and feasible approaches to plan the financial future and emerge out from the current situation. The advisor can also offer various resources as aid.
3. Refinance your mortgage.
Refinancing the home loan can obviously be your most effective and easiest way to avoid a possible default. If your loan has a standard rate, it will be more possible that you get approved for a refinance. Just be reminded that refinancing is almost like renewing your home loan. You will be able to repay the loan balance of your current mortgage through taking a new one. The interest rate or cost can be lower or higher so be more careful and wiser when considering this option. As many experts will remind you, loans tend to be costlier the longer they remain. Refinancing is like prolonging a loan but it can certainly help you prevent a possible default at the moment.
4. Resell and downsize.
Everyone may agree that this way is the most drastic and desperate. But it can be possibly done. Proceeds from the sale can be used to repay the mortgage in full. The remainder of the amount can be used to make a down payment for renting a smaller house for you and your family. This option is somehow depressing especially if you are emotionally attached to your home. It is also quite costly because relocating and moving can require money. But it surely will be worth doing.