When your financial circumstances change and you find yourself in a difficult situation, you may have to face the possibility of defaulting on your mortgage repayment. What can you expect if this happens?
When you have defaulted on your first payment, your lender will most likely send out a letter regarding the late repayment and this usually incurs a late fee and a processing fee. It is important at this stage to contact your mortgage lender, to explain your situation and work out an alternative option. If however, you do not contact your lender and allow the mortgage payment to default for more than 90 days, the lender will commence a foreclosure procedure to repossess your home. This means that your home is in the repossession stage and you no longer have a right to it. In a bid to save your property, stage talks with your mortgage lender first to see what options are available and even consider hiring a good attorney for renegotiations on your lending agreement. A good attorney experienced in repossession cases, will know the ins and outs of this kind of case and help you work out what your best option to take is. In most cases, your money lender will be happy to try renegotiating the situation until you get back on your feet. Do this before it gets too late and you end up incurring further fees.
Aside from the risk of losing your home, a major consequence on defaulting on your mortgage loan, as with any other loan agreement, is the negative effect on your credit history. It takes years to build good credit and defaulting on your mortgage, particularly to the point of foreclosure, can cause you a lot of problems for future financing. This includes not only future mortgage applications, but also financing for a car, credit cards, store-credit, and any and all credit applications. A poor credit rating can ruin your credit rating for many years.
The best way to prevent things getting out of hand is to avoid defaulting, and particularly foreclosure, at all cost. One way to do this is to not take out a mortgage beyond your means. As a guide, when purchasing a property, ensure that it does not require more than 40 percent of your monthly income. It is also a good idea to have mortgage savings of at least three months’ stored away as a back-up, in case of any difficulties. Consider taking out an insurance plan for accident and injury or loss of income to cover you for any serious situations.
Remember to talk with your lender if your repayments are becoming too difficult for you. Consider looking into a refinance mortgage rate and look into the best mortgage loans available. This may involve changing companies, so look for the best mortgage refinance company available. There are many companies out there who can take over your loan and offer you a lower monthly rate of payment. Remember to check carefully however, and do not let desperation cloud your judgment or allow you to make rash decisions.