How to Prevent Foreclosure

Mortgages are being defaulted upon at an alarming rate right now which is not only setting our economy into dire straits, it is also placing families at high risk of losing their homes. Many banks are loaning money for mortgages that just don't seem to make sense from an income versus debt ratio perspective. Be smart about your future when asking for a mortgage loan. In the end, it's your responsibility to be certain that you can make those monthly payments. Not just now, but in long term - and also in the worst of times as well as the best of times. If the worst of times is starting to set in and your fearful of defaulting on your mortgage payments, here are some tips for you to try and head off the risk of foreclosure - and protect your credit.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Mortgage
• Willingness to do what it takes to avoid a foreclosure

1. In many areas right now, interest rates are at all time lows. If you have a variable rate mortgage or a higher rate mortgage, you could consider re mortgaging your home to secure a better rate. This makes good sense whether you are struggling to make your payments or not.
2. When you re mortgage, consider extending the length of your mortgage. This will cut your payments down. You'll have to pay on it longer, and by doing so, you will also be paying more in the end towards your interest fees so weight this out wisely.
3. Another thing you can do is to opt for an interest only mortgage. I hesitate even suggesting this one because of it's hidden dangers. Remember that if your only paying interest, then you are not paying down your home itself. It's hard to build valuable equity this way. If you don't have the willpower to say "enough" and move on to paying more than the owed amount, you will never get the home paid off. But if times are super hard, it could be a necessary evil.
4. Talk to your lender. This seems obvious but some people don't stop to do this before their is a serious problem. It's in your lender's best interest to help you so ask. They may be able to offer a skipped payment (where they would tack it onto the end of the loan to be paid off later *which will equal more interest being due) or allow you to make a one time interest only payment. How much you save here will depend on how far into the mortgage term you are.
5. You might even want to consider taking in a boarder. Even temporarily. If you have the room, this could end up being very desirable. Most situations like this have the boarder paying up to half the mortgage payment in rent.
6. Take on another job. Something as simple as waiting tables. My 16 yr old son often makes in excess of $100/DAY in tips at a small, out of the way restaurant on the weekends. This would be money you would not have to wait for. Be honest with your employer and they may not mind throwing you some extra time. Your main employer may even give you some extra overtime.
7. Sell your home if you don't feel this is a short term situation that can be averted. That's a hard pill to swallow but it's better than losing everything, including your credit. But do talk to your lender first, they may have other ideas that would help in your specific situation.

Tips & Warnings

• There are various agencies that could help you make your payments. Ask your lender about them.
• In good times, pay extra on your mortgage payments. Example: My sister paid just $20 a month extra on her mortgage each month and paid off her small house YEARS earlier in the end. A little makes a HUGE difference as the extra is taken off the principle balance, not eaten up by interest payments. And in turn, the interest is lessened as the balance goes down. Be sure your lender doesn't penalize for extra payments. (most don't but be certain)