Bought a house on a 15-year mortgage and decided to pay half the family’s monthly earnings for a mortgage? What if your circumstances have changed and you can no longer pay your bills? Let us find out how to deal with these situations so that you can avoid penalties and keep your mortgage. And, how to protect yourself if you are just about to buy a house with a mortgage.
Step 1: Call the bank yourself or contact a broker first.
Tell them what happened and why you cannot pay. Here are the circumstances that the bank will certainly consider reasonable.
– Cut down or dismissed for health reasons. The company has closed. Quitting your job or being fired for disciplinary reasons is not considered a valid reason.
– Severe wage cuts.
– Family members become seriously ill and need a substantial amount of money for medical treatment.
– An accident with great material damage occurred: fire, flooding, grand theft, theft, car accident, etc. If you are in trouble with a property that you bought with a mortgage, compulsory insurance will compensate for everything.
Call immediately or at least in the first month after the day of delinquency will already accrue penalties in the second month. After the third month, there is a chance that the property will be taken away and the credit history will be ruined forever.
If you cannot pay for other reasons, in any case, you need to contact the bank manager or a mortgage broker. The decision is made individually. The main thing is to provide written confirmation of what happened and your expenses.
Step 2: Collecting Documents
It is necessary to clarify what documents to provide to confirm the circumstances and bring them to the bank as soon as possible.
Step 3: Choosing a solution
When the bank verifies the information, you will be offered several options. The most common is restructuring. Or, simply put, renegotiating the terms of the loan. What the bank may offer:
– Reduce the monthly payment by extending the term of the mortgage.
– Provide a grace period of up to two years. During this period, you can choose not to pay principal and part of the interest.
– Loan vacations – a grace period during which the borrower can reduce or suspend mortgage payments.
When your finances get better, the bank will distribute the balance in equal payments over the remainder of the loan term. You can also increase the term of the loan at the same time so that your monthly payments will be lower.
The bank’s job is not to add to a person’s debts, but to help him fulfill his obligations under the contract.
Another option is refinancing. We have already written in detail about how and when to refinance a mortgage.
How to protect yourself?
Before you take out a mortgage:
– Prepare a safety cushion of 5-7 payments. That is how many months it takes on average to find a job.
– Calculate your monthly payment so that it does not exceed 30% of your family’s budget. When calculating your budget, do not include bonuses. At any time, your employer can stop paying them.
– Play “mortgage” – set aside a few months for a “monthly payment”. This way, you will understand whether you are comfortable, whether you have enough to live on in case of unexpected expenses. And at the same time, save up for a down payment.
LBC Mortgage specialists are always ready to help you in case of difficulties with mortgage payments, advise you on the best way out of the situation, and communicate with the lending institution on your behalf. Call us at any time!