Here's What Happens When Your Mortgage Becomes Unaffordable

In March, the median monthly mortgage payment for new applicants rose to $1,736, according to the Mortgage Bankers Association. If you're a homeowner, that figure may be a lot lower than the mortgage payment you're paying today, or a lot higher. But either way, you may be at the point where it's become a struggle to keep up with your mortgage payments.

Perhaps your personal financial picture has changed. Maybe you were laid off at work and had to accept a lower-paying job. Or maybe you had a baby and are now facing sky-high childcare costs that are making your remaining bills, including your mortgage, difficult to cover.

Also, a lot of people are struggling in general these days due to inflation. So if higher living costs are making it problematic to keep up with your mortgage, that's understandable.

If your mortgage was once affordable for you but that's no longer the case, you have some options. One, of course, is to try to sell your home and move to one that's less expensive. This is an especially viable option right now because housing inventory is down on a national scale and home prices are still high. So chances are, you'd be able to sell your home for enough money to pay off your mortgage in full.

But you may not want to sell your home. Doing so would mean having to move, uproot your family, and potentially take on a much higher mortgage rate by virtue of getting a new home loan. So if that's not a route you want to take, your best bet is to reach out to your lender and see what help it can offer.

You may have more options than you think

Falling behind on your mortgage payments could cause you to lose your home. This won't happen after a single missed payment, or even a couple. But eventually, if you stop repaying your mortgage, your lender will have the right to foreclose on your home, and that's not what you want. Not only will you be forced out of your home, but your credit score could take a massive hit.

A better bet, therefore, when you're struggling to pay your mortgage, is to contact your lender, explain your circumstances, and see what help it can offer. There are a couple of options that may be available to you.

First, if your financial struggles are more temporary in nature, then you might get the option to put your mortgage into forbearance. With forbearance, you don't make payments for a period of time, but you're not reported to the credit bureaus as delinquent.

Secondly, your lender might agree to loan modification. This isn't the same as a refinance, which has you getting a completely new mortgage. Rather, when your loan is modified, its terms change. And in the case of a financial hardship, you might get your loan modified so that your repayment period is extended, but your monthly payments shrink in the process.

Reach out when you're struggling

Mortgage lenders want to get repaid, so you may be surprised at how willing yours is to work with you. But the sooner you reach out once your mortgage becomes unaffordable, the better. That way, you can put a plan in place that allows you to avoid foreclosure and the many unpleasant consequences that come with it.