What To Do (financial coach) If You Get Behind On Mortgage Payments
No commentsBy Nicholas Hunt
In these difficult economic times, even the most persevering of homeowners may find it difficult to keep up with their mortgage payments. With a faltering job market, increasing unemployment, and tightening restrictions on credit, mortgages are frequently falling into arrears.
The growing number of home foreclosures has been in the forefront of recent news, and many people are facing the frightening possibility of losing their homes.
For those who find that they cannot meet their monthly expenses and are falling behind on their mortgage payments, it is vitally necessary to take action before the lender exercises the right to foreclose on the property.
What to do in this case depends on the specific situation, but the most important step, one which applies to all circumstances, is to communicate with the lender. A simple phone call will let the mortgage holder know that you are willing to work together to resolve the past due balance; ignoring letters and phone calls gives the impression that you have no intention of rectifying the situation. While it can be intimidating to initiate a conversation with the bank or other lender who holds your mortgage, most lenders are happy to try to find an alternative to foreclosure.
Particularly in cases where there is little equity in a property, it is important to remember that the lender prefers not to take possession of the home. Foreclosure is a costly process, and the lender is unlikely to cover the expense with the sale of the property. Therefore, banks and mortgage companies are very likely to try and work with you to cure the delinquency on the mortgage.
Many lenders offer some type of forbearance agreement. One type of forbearance allows borrowers to make slightly higher monthly payments until the past due amount is recovered. Another alternative is to work out an agreement where payments are reduced or eliminated for a certain period of time, to be recouped at a later date (with interest).
If your situation does not allow for this possibility, it may become necessary to sell the property. While this is not ideal in the current real estate market, it is preferable to losing your home to foreclosure.
Again, it is not possible to over-emphasize the importance of contacting the lender who holds your mortgage. If you remain silent and do nothing to help yourself in this situation, the bank or mortgage company will eventually have no choice but to initiate foreclosure.
Nicholas writes on personal debt problems and you can read more on missed mortgage payments at his site.
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Take Care When Choosing Debt Consolidation
By Nicholas Hunt
As credit card and revolving debt rises in the UK, consumers faced with the challenges of managing multiple creditors, high debt, high interest, and the associated emotional burdens are more and more turning to debt consolidation. Debt consolidation is the process of paying of high interest rate debt with a new loan amount that comes with a better annual percentage rate.
Debt consolidation takes a few different forms, but secured homeowner loans are a fast-growing method of debt consolidation. Secured homeowner loans usually offer the best interest rate for most consumers. Because they are secured by the debtors personal property, lenders are more drawn to offer the best rates and terms. This is why many consumers are trading in less favorable unsecured credit card debt and high interest debt.
While there are certainly financial advantages available with optimal debt consolidation, there are also challenges and cautions that borrowers need to be aware of. These challenges are often so concerning that some financial advisors and lenders discourage borrowers to avoid large loans for debt consolidation. There are a few common pitfalls of debt consolidation. Two more common concerns include: Reuse of freed up credit funds, and 2) Deceptive lending practices by some lenders.
Despite the interest advantages possible with debt consolidation, many financial advisors caution borrowers to consider their spending behaviors before consolidating debt. Debt consolidation is essentially a ‘band aid solution’ to fix problems that resulted from irresponsible use of debt and bad spending habits. A better loan rate can certainly help create a better position with existing debt but it does nothing to change the bad habits that created it in the first place. Many borrowers consolidate debt, and simply spend more money using the freed up credit cards and other loan funds. Ultimately, they wind up with more debt than they had before.
Another major word of caution from financial advisors warns borrowers to beware of the fine print and details of debt consolidation loans which can be disadvantageous to borrowers. Many lenders are ethical and work with customers, but there are many lenders who take advantage of desperate borrowers. They promote the benefits of debt consolidation but hide restrictive loan details including prepayment penalties, hidden fees, padded loan insurance premiums and more. Borrowers need to read the details of any debt consolidation loan. Of course, a home secured loan used for debt consolidation also exposes the borrower to a risk of property loss. Discretion is very important.
Nicholas writes on debts and ways of dealing with them, including debt consolidation and management programs.
Saturday, October 25th, 2008 at 5:50 pm and is filed under finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
