An unfortunate effect of the recession is that more Americans than ever are facing the possibility of foreclosure as arrears have built up due to cashflow problems. However, while this is a serious state of affairs, there are some steps which can be taken to try and avoid losing your property.
The biggest mistake that most homeowners in financial difficulties make is hiding from their lender. Avoiding telephone calls and not answering mail is not an effective strategy to dealing with mortgage arrears, yet many people think the longer they can get away without talking to their lender, the problem might resolve itself.
In reality, the sooner you speak to your lender, the better. Even if you are finding it difficult to meet the payments but are not yet in arrears, having a chat with your mortgage provider may bring surprising results. Contrary to popular perception, lenders do not like foreclosing on properties; it is time-consuming, expensive and a lot of hassle for them. They are therefore usually very willing to work with a mortgagee having temporary difficulties, especially if they are proactive in contacting the firm rather than waiting until things have gotten out of hand.
If you prefer to get some independent advice before speaking to your lender, there are many non-profit making organizations who will help you with your finances and may even communicate on your behalf. Each state has a different set-up but there will be a number of groups available to help get you through a difficult period, without having to pay for the advice.
But before you speak to either your lender or an advisor, a good idea is to take a look at your finances yourself and work out what you can afford. Knowing that you have made all the cut-backs possible and calculating how much of your mortgage you can pay is the first step to straightening your problems out.
Lenders tend to be more forgiving if there is a change in circumstances which has brought about the financial difficulties, such as job loss or reduction in hours or pay, medical problems or even a divorce so it is worth thinking about what has caused the shortfall.
Lenders have a number of options they can offer delinquent borrowers. Forbearance is one course of action and involves legal action being suspended to give the individual more time to get their finances straight and work out a repayment plan. This is one of the most common courses of action but others include adding on the amount of the missed payments over an extended period, changing the term of the loan or simply even adding the arrears to the outstanding balance, thereby increasing the length of the loan.
There are many firms in the market who will attempt to take advantage of desperate home-owners and will promise foreclosure can be avoided in return for a fee. In most cases, these are scams, or empty promises ad can sometimes even result in the property being signed over without the owner realizing.
Hindsight is a wonderful thing, but if at all possible, trying to anticipate how much the mortgage is likely to cost in advance of taking it out can be a good idea and a mortgage cost calculator can help you do this. By having a play with the figures it is possible to estimate what the repayment could potentially rise to and allow you to put together a budget to cover all eventualities.