by Fran Connors
(New York, USA)
Foreclosure is NOT a pleasant option……make your payments on time!
At the time of getting your mortgage, there is a ton of paper work that is completed in front of the lender and your mortgage broker, if you used one. Some people don’t bother with reading the details outlined in the papers, but it strictly informs you that you must make the mortgage payments on the date specified on file.
The lender has the right to take action against you if you don’t make the mortgage payments on time. Things will not be as bad as you think if you make a late payment, but it will still affect your credit history.
The first time you miss your mortgage payment, you will receive a letter advising you that you missed a payment and late charges will be applied. Most financial institutions will place a letter in your file and add a note in your credit report.
Lenders always urge their borrowers to get in touch if they cannot make a future mortgage payment. Depending on your financial standing, you may be offered a protective line of credit to help you in case you cannot make a payment. The line of credit is issued by the lender and is available to you at anytime. This would be perfect just in case you may not have enough to make the next payment.
However, for those who don’t have an extra funding source, it can be a little tough to manage all the expenses. The second time you miss your monthly mortgage payment, your lender will try to get in touch with you, most likely by phone. If you try to avoid the lender, they will not know if there is an issue with your finances.
In many cases, the lender would call you to make other arrangements to make the mortgage payment. Over the first three months; your financial institution would have reported to the credit bureau a total of three times. There will be a significant impact on your report when you have already missed three mortgage payments.
After the fifth month of defaulting on your mortgage payments, the financial institution will send your file over to the foreclosure department. Keep in mind that until you have fully paid off your home, the bank still owns the home. Once the foreclosure procedures have completed, the bank will gain control of the home and you will be asked to move.
Essentially, you will lose your home in the end with a huge impact on your credit report, resulting in a very bad credit rating. During foreclosure, you will have to deal with administrative costs for the work. In end, you will be losing your home, the money you put into it and any equity you earned.
After defaulting on your monthly mortgage payments, you can still get back on track by paying off the missed payments. If you are able to get a loan from a lender, you would be able to pay off the payments, but you would need to think about the future and whether you can make all the other payments.
All in all, it is crucial that you make your mortgage payments, even if they are late, as the consequences can be quite harsh!