What if you cannot pay the mortgage?

You may have tried every aspect to determine the best way to clear the mortgage. You may have sought help from known ones, explored possibilities of earning more, etc. However, the growing expenses still make it difficult for you to save enough.  

It thus makes you conclude that- “I cannot afford my house anymore!” It may lead to a panic-like situation as a mortgage is a long-term loan. Missing out or non-repayment may mean losing your property. Would you like to lose one after all these years of hard work? Of course not. If you’d like to look at the possibilities of dealing with the existing mortgage, read ahead.  

What happens if you cannot pay the mortgage by the term’s end?  

If you fail to pay the mortgage repayments by the end of the term, the creditor may demand the full outstanding balance the very moment. It is especially in the case of an interest-only mortgage. As you lack the flexibility to pay, you have a few options to deal with this. You can sell the property, remortgage it or face repossession. Otherwise, it may lead to court proceedings by the creditor to recoup the loss.  

I can’t pay my mortgage anymore. What are my possible options?  

You can contact your loan provider and seek forbearance. It suspends your mortgage payments for 12 months until you wish to resume the payments. The creditor would not contact you for payments within this phase. However, you must pay the dues after 12 months. Work on the options to cover the payments without worries. When ready, get a personalised repayment term and clear the dues.  

Here are other options that you may consider:  

Rent out the home temporarily 

It could be tough to move out of the house, but clearing the mortgage is important. Renting out your space may help there. Explore the affordable rentals nearby to save money on moving costs as well. As a landlord, you must know about the following things:  

• Increase the insurance cost of the property 

• You will be responsible for repairs and maintenance 

• Arrange the existing and repay mortgage payments while looking for a rental space. 

If you need money for updating the property before renting, check options online. With a mortgage, you may not get a big loan. However, you can still finance the costs individually. Check no guarantor loans for poor credit scores. It helps you update the property to put it up for rent. Pending mortgage debt affects the credit score, and it leads to a bad credit history. Therefore, the loan would be the best to meet your repair goals.  

Contact and negotiate the agreement 

If you don’t want to rent it anytime soon and are exploring further options, contact the creditor. He should be the first person whom you must contact and explain the financial situation. A mortgage is a long-term agreement and is sufficient to build a good relationship with the creditor. If you have been regular with payments previously, he may help.  

Don’t take any action before consulting the creditor. It is because he has known your finances for a long time. Thus, it may help you with a personalised payment plan. It generally aligns with what you can pay comfortably. In some situations, he may even allow pre-payments to settle the debt early. However, not everyone provides one.  

Consider the short sale option 

In some situations, a short deal could be the most suitable opportunity. For example, it could be the solution to queries like- “I have not paid my mortgage in 7 years, what to do?” It reveals that you cannot pay the loan anymore. In this case, the creditor agrees to your plea of short-selling the home. He accepts the sale amount in exchange for settling the debt. However, it is not absolutely an acceptable thing financially.  

A brief sale appears on your credit report as an unfavourable observation. It is because one chooses this option when they work to settle the mortgage. However, it does not impact your credit score much, unlike foreclosure does. It, in turn, prevents you from paying a heavy penalty on a long-term loan like a mortgage.  

Try to pay at least a minimal amount 

If you cannot pay the full amount, check whether you can pay part payments. You can discuss the possibility with your loan provider. He may allow it if your finances reveal the possibilities of completing the debt payments.  

You would need to work out your budget and increase your monthly savings. Sometimes, the solution to boosting savings is hidden in your debts. Check debt consolidation loans with no collateral requirement online. Get one based on your recent financial management, basic income, and credit history length. It helps you merge some costly pending debts into a single monthly payment.  

Eventually, you can save money on interest and the overall amount to pay. Thus, you can utilise the cash to pay the minimum costs on the debt. It keeps your liabilities low and increases your credit score. The creditor may agree to or provide a grace period to clear the debt. 

Sell the home (permanently) 

It should generally be the last resort to consider. However, it would be ideal to sell the property if it has grown in value over the years. You can use this positive equity to clear your debts. By selling the property at more than what you owe, you can clear the dues easily.  

However, ensure that the property is in good condition. It can only attract wealthy investors or individuals. Set up a timeline by which you must conclude the sale. It will help you meet the debt proceedings without adding further penalties. 

Bottom line 

These are some aspects that you may watch out for while seeking solutions to mortgage payments. It is natural to face hard financial times. However, these must not keep you from hitting the largest goal of your life- buying a home. Know your liabilities, discuss options with the creditor, and sell the property. These options may help you get rid of the heavy mortgage debt quickly. 

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