If you find yourself in a tough financial situation and are behind on your mortgage payments, this can cause an immense amount of stress on you, your family, and all aspects of your life. When you begin to fail paying your mortgage, it can quickly get out of hand. It is important to take action immediately to avoid penalties, potential fees, and big hits to your credit. At Trusted House Buyers, we want to equip you with information to help you make the right choice for your unique situation. There are options when you are faced with the uncertainty and financial distress of getting behind on your San Diego property’s mortgage payments.
Mortgage Modification
A mortgage modification allows you to permanently adjust your mortgage payments to make your payments more manageable for you. According to consumerfinance.gov, “Modifications may involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing or reducing your principal balance.” However, this does mean that you will be paying more in interest for this adjustment. Some home owners feel that this is worth it to stay in their home, but you need to make sure you can still afford this payment with the new rate. Also, if your credit is not stellar, it is going to be very tricky for a mortgage lender to grant you a loan modification. Snap Finance has found that when in, “A 2019 Experian Consumer Credit Review found that 16% of consumers have a “very poor” credit score, and 18% have a “fair” credit score.” Sadly, “fair” and “very poor” credit scores will not grant you a loan modification. If you are in that situation then you should look for the next best option.
Refinance
Refinancing is another option that is out there for San Diego homeowners that may be behind on their mortgage payments, but again, this option is for those who have good credit. To even be eligible for refinancing, your credit needs to be in good standing. Not only does it need to be in good standing, but in most cases, refinancing works best if you have at least 20% equity in your home to avoid costly mortgage insurance on the new loan. According to National Home Loans, “Refinancing allows you to replace an existing mortgage with a new loan at a better interest rate and term. It’s a common process, but not all refinancing options are created equal.” Perhaps a few years ago when interest rates were at an all time low, refinancing seemed like a no brainer and homeowners were running to get refinanced to obtain the lower interest rates. Unfortunately, those days are long gone and rates have more than doubled, leaving homeowners at a standstill. Currently, refinancing in San Diego doesn’t seem like the best option because most likely you are already sitting on an interest rate that is lower than the rates right now. However, the market moves in waves and most are expecting interest rates to balance out in the coming year. If you do feel that refinancing is the right move for you, it has the potential to save you money each month with a lower mortgage, it has the potential to free up some cash to help you pay off debts or make improvements to your home, and it can change the terms of your loan. But right now, in today’s current conditions, refinancing doesn’t seem to be the light at the end of the tunnel.
Forbearance
If you can’t pay your mortgage because of “temporary” hardship, than asking your loan office for forbearance can suspend or reduce your mortgage payments for as long as 12 months. However, if you feel that you don’t have to repay the money that was suspended, think again. Most times, you will need to repay the money that was held in a lump sum. Experian explains that, “A repayment plan is an agreement between a borrower and a lender for how a debt will be paid off over time. More specifically, repayment plans often refer to special agreements for making more affordable debt payments when a borrower is struggling to pay.” Like all modifications to help those in financial distress, forbearance does carry the risk that it can affect your credit, and we all know that when your credit is dinged it can cause a trickle affect in your future financial success.
Rent Your Home
Another option is to rent your home. If you do chose to rent your home, you will need to make sure the rent not only covers the cost of your mortgage, but that you have built in extra funds coming in that will cover necessary repairs, property taxes, and any issues that may arise with the property. Being a landlord is not for everyone. It can be quite challenging to be a landlord if you are not living in the same city as your rental. If do plan on moving away from the property, you will want to highly consider paying a property manager, yet another expense of being a landlord. In addition, you need to make sure you have the funds available to pay for the mortgage while you getting the property ready to rent and also if the home sits vacant while you are waiting for the right renter. If you do end up going into foreclosure when renting the property, beware, the tenants could have grounds to sue you.
Sell Your Home
When you get behind on the mortgage payments of your San Diego home, we understand that it can cause a mountain of stress and burden on the homeowner. If the above options only seem to cause your blood pressure to continue to rise, there is one final option that may be the simplest and most streamlined. That is selling your home to a cash buyer like Trusted House Buyers. When you decide to sell your home to Trusted House Buyers, we will give you a fair CASH offer for your home in the condition that it is in now. If you accept the cash offer, we can usually close within 10 days. That means you will no longer have the burden of your mortgage hanging over head and you will have a lump sum of cash in your hand to help you move on to the next chapter of your life without a foreclosure, without asking for forbearance, without taking on the hassles of being a landlord, and without dealing with loan modifications and refinancing. If you are interested in how Trusted House Buyers can help pull you out of financial distress, please give us a call today 619-786-0973. We are a family run business in San Diego and are eager to help you and your unique situation!
