Missing mortgage payments can be stressful because they can lead to foreclosure.
Fortunately, there are ways to get caught up on mortgage payments, whether you’ve only missed one payment or multiple.
If you’ve only missed one or two monthly payments, the solution may be adding those missed payments to your next mortgage payment.
Lenders may be understanding when you miss mortgage payments for only one to two months. They realize life can happen, and sometimes homeowners need a little time to get their finances in order. It is imperative that you catch the monthly payment up as soon as possible.
Don’t assume that foreclosure is in your future if you miss a mortgage payment because of an emergency or family event. You may be able to repay what you owe quickly enough that you won’t need to consider alternative options.
If your missed mortgage payments are more of a theme than a one-time mistake, it may be time to look into a repayment plan.
A repayment plan is a comprehensive plan to make your loan current once again. It involves meeting with your lender and asking what they can do to minimize your financial difficulties.
For instance, say that your income was temporarily reduced because you lost your job or had to take a pay cut. You can speak with your lender and ask to reduce your monthly mortgage payments for six months, then agree to repay the money you owe by increasing your mortgage payments for the following six months.
A repayment plan will only be effective if you fully understand your financial situation and can trust that your income will be consistent for some time to come. A lender is not required to accept a repayment plan offer, so be prepared to negotiate.
You can also ask for a loan modification. With a loan modification, you ask your lender to change some aspect of the loan, such as:
Your lender does not have to agree to a loan modification offer. However, many lenders will be happy to do so, because it costs them less in the long run to work with borrowers as opposed to going through the foreclosure process.
If you have several months of missed mortgage payments but have plenty of money because of an unexpected financial windfall, you can use that money to catch up — specifically by paying down the principal.
The principal is the remaining balance on the loan, not accounting for interest. If you make extra loan payments toward your mortgage, the principal will gradually be reduced. Since your interest payments are calculated based on the existing principal each month, reducing the principal will also reduce how much interest you pay over the loan's lifespan.
This can be a great way to reduce your average monthly mortgage bill, especially if you pay several thousand extra dollars over a few months. Just keep in mind that some lenders may not allow you to make extra principal payments toward your mortgage loan due to a prepayment penalty clause — be sure to read your mortgage loan’s terms and conditions.
Loan forbearance is when your lender agrees to either reduce or postpone your mortgage payments for a set number of months, typically up to 12 months. After that timeframe, you need to repay any money you owe to your lender.
A forbearance arrangement may be beneficial if you know your income is only temporarily reduced and you know you’ll be able to make the extra mortgage payments later on.
Balance Homes is a co-ownership solution with a mission to help American homeowners stay connected to the homes they love by offering a flexible alternative to traditional financing when life circumstances change. Our model also focuses on long-term financial health and education, helping homeowners understand their options, manage their equity, and build a plan that fits their needs.
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Sources:
Foreclosure Process | U.S. Department of Housing and Urban Development (HUD)
What is a mortgage loan modification? | Consumer Financial Protection Bureau
What is mortgage forbearance? | Consumer Financial Protection Bureau
Home Equity: What It Is, How It Works, and How You Can Use It | Investopedia
