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I Can't Keep Up With My Mortgage Payments. What Options Do I Have?

Oct 10, 2019 by Maurie Backman
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You bought a home you could afford back in the day. But if you've had a drop in income or an uptick in other bills, you may struggle to make your mortgage payments.

The problem with that scenario, of course, is that late payments can damage your credit, making it harder to borrow money when you need to. And if you go too long without making a mortgage payment, you could wind up facing foreclosure.

Thankfully, you can take several steps before resigning yourself to that extreme. Here are a few options to look into if you have trouble paying your mortgage.

1. Refinancing

Refinancing means swapping out your existing loan for a new one. If your credit is strong, you may qualify for a much more favorable mortgage interest rate than you did when you first applied. Lowering your interest rate lowers your monthly payment, making it more affordable.

2. Forbearance

If you're experiencing a temporary hardship that makes it difficult to keep up with your mortgage, your lender might let you hit pause on your payments until things improve. It's an option known as forbearance, and it's a viable route to explore if your financial issues stem from the loss of a job or an injury or illness that prevents you from working.

Forbearance, however, isn't a long-term solution, and you'll need to make a strong case to your lender to qualify.

3. Loan modification

With a loan modification, your lender changes the terms of your mortgage to reduce your payments.

Sometimes, a lender will agree to a lower interest rate, achieving a similar result to refinancing. In other scenarios, a lender might agree to extend a loan's repayment terms so your monthly payments are lower. Talk to your lender and see what options are on the table. Keep in mind, however, that if your credit is strong, it may be worthwhile to look into refinancing first and revert to loan modification if that doesn't pan out.

A final option

Of course, there's another option to consider as well: If you have a hard time making your mortgage payments and aren't underwater on your mortgage (you don't owe more than your home is worth), you could try selling your home and moving someplace more affordable.

Granted, it's not a wonderful option, nor is it easy. And there are costs associated with selling a home and having to move. But if you have the option to escape the situation with your credit unscathed, it could pay to unload a property that's grown too expensive and start fresh in a more affordable home.

If you do owe your lender more on your mortgage than what your property is worth, selling could still be an option provided your lender agrees to a short sale. Though going that route could hurt your credit, the damage won’t be nearly as extensive as it would with a foreclosure. And while it may take you some time to rebuild your credit, once you do, you can apply for a new mortgage -- one you can keep up with.

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