Due to unforeseen circumstances, some homeowners may come across hard financial times in which they find themselves unable to afford their mortgage. This could be due to losing a job, a decrease in work hours, sudden expenses, an unexpected need for time off, or a number of other factors.
Even though you may feel like you have no other options, there are things you can do in order to make your home loan more manageable for your financial situation.
Below are five tips for handling a mortgage that you can't afford.
1. Rent out an extra room in your home.
If you have any extra space in your home, then you may want to look into renting this extra space for extra money. You may even have enough extra space to make enough money to cover your whole mortgage payment each month.
2. Seek a loan modification.
By obtaining a loan modification under the Making Home Affordable Modification Program, you may be able to lower your monthly mortgage payment. You can find more information on this directly on the Federal Trade Commission's website, but below is a quick summary:
You may qualify for a loan modification under the Making Home Affordable Modification Program if:
- Your home in which you are seeking loan modification is your main residence;
- You owe less than $729,750 on your first mortgage;
- You received your mortgage before January 1, 2009;
- Your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) is more than 31% of your current gross income; and
- You can't afford your mortgage payment because of a financial hardship, such as due to losing a job or medical bills.
3. Refinance your home loan.
Depending on when you first received your home loan, your interest rate may be higher than what the average person gets these days. You may want to contact a mortgage lender and see if you are able to lower your interest rate. This may be able to help you shave possibly hundreds of dollars each month off your monthly mortgage payment.
Before you refinance your home loan, you should always do your research and see what the fees and costs are in order to do so. There are usually closing costs and other fees that can make refinancing your home loan quite expensive in some circumstances.
4. Sell your home and move into something cheaper.
If you are not underwater with your home loan then you may want to think about selling your home, making a little bit of a profit from the sale, and downsizing into a home that is more affordable.
There are many costs to think about before you do this, such as moving costs, closing costs, buying costs, and more. However, buying a home that is more affordable may save you money and most likely headaches in the long-term.
5. Contact your home loan provider.
If the options above do not help you enough so that you can afford your mortgage, the last action you may have to take is to contact your mortgage lender directly. They may be able to come up with some sort of plan so that your house does not get foreclosed on.