5 Things to Know if You’re Behind on Your Mortgage Payments Skip to main content

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5 Things to Know if You’re Behind on Your Mortgage Payments



Find out what your options are if you are late on your mortgage

Image Source: Flickr User Daniel Arauz

The idea of losing your home is scary – and if you’re late on your mortgage payments, have missed a few here and there and know you can’t make them up, you may be terrified of what comes next. There are several options available to you if you can’t make your mortgage payments that can help you save your home – or make a wiser decision about your living arrangements. Here are five things to know if you’re behind on your mortgage.

#1 Mortgage modification may be a band-aid, not a permanent solution

If you can’t afford your loan payments due to other debt, an increase in payments due to an ARM adjustment, unemployment, or any other circumstance, you may be able to get your lender to work with you on a mortgage modification. Depending on how far behind in payments you are, your current income, and other factors, the lender may allow you a lower interest rate as part of a modification which will bring you back to current (although any late payments and fees will likely be tacked onto your loan balance). Government programs such as HARP or HAMP may also help.

However, if you’re behind because the mortgage payments are too steep for your current income, a modification may not be a long-term solution to your housing payment problems.

#2 Equity is an important consideration

If you have equity in your home, that’s a critical consideration in how you treat your mortgage debt and delinquency. If the equity is sizeable, you may be able to sell your home, get out from under the payments you can’t afford, and leave with some money in hand to buy or rent a more affordable home. If you allow your home to go into foreclosure without resolving matters, your equity will likely be lost for good. However, if you have no equity in the home or negative equity (when you owe more than the fair market value of the property), you may be wise to walk away from the mortgage.

Many people will try and hang on to a home tooth and nail – even one they truly can’t afford, and that’s not adding value to their life. Think carefully before you sacrifice everything for your house.

#3 Foreclosure takes time

Just because you’ve missed a mortgage payment or two and got a threat letter from your lender doesn’t mean you’ll be ousted from your house right away. In fact, foreclosure takes longer than you may realize. Plus, lenders don’t want to jump into foreclosure fast because it’s a hassle for them and can end up costing them money. From the moment you miss one payment, the collections letters should start – as will calls – but it can be months (in some cases even a year or more) before the lender goes through with the foreclosure. This means you have time to figure out what you want to do with the home – keep it, try to catch up – or let it go and find something more affordable. The speed of a foreclosure will depend on your lender, the market you live in, and other factors. 

A formal foreclosure notice will alert you that your home will be put up for sale at a foreclosure auction in 30 days (give or take). From there, the sale is made then a notice of eviction sent later.

#4 Chapter 13 allows you time to catch up

Bankruptcy can help you deal with delinquent mortgage payments. A Chapter 13 bankruptcy allows you to catch up on the past due balance by paying installments on that debt over a three to five-year period. You will have to make the installments plus keep current on the regular monthly payments. However, if you have a second mortgage or home equity line of credit that is not supported by equity, you may be able to strip those away which can lower your monthly debt payments. You may also be able to ditch some unsecured debts including credit cards and medical bills – in part or in full – depending on the terms of your repayment plan.

Chapter 13 may be a good option for someone who fell behind because of a circumstance that has been resolved and for those with equity in their home that makes it worth saving.

#5 Chapter 7 allows you an escape hatch

Chapter 7 can be helpful because it wipes out unsecured debt like medical bills and credit card debt and can free up your budget so you can get caught up on your house payment. The automatic bankruptcy stay can give you time to work out a deal with your lender – or save up money to move out and find a new place to live so you can get out from under a mortgage you can no longer afford. For some homeowners, a combination of Chapter 13 and Chapter 7 – referred to as a Chapter 20 – can be helpful to unload unsecured debt and give you the chance to catch up on your past-due mortgage payments.

Chapter 7, alone or in combination with Chapter 13, may be a better approach than just a Chapter 13 depending on your financial circumstances.

To find out more about how bankruptcy may help deal with your delinquent mortgage, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 for a free bankruptcy consultation at one of our offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington to talk about your finances and how we can help.

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