It is not unusual for people to fall behind on mortgage payments. According to data by the Mortgage Bankers Association, more than 3 million homeowners missed or made late payments in September 2020, a sign that the coronavirus pandemic is still affecting the economy.
Although failing or making delayed mortgage payments is normal, it doesn’t bode well for your ownership of the house. If you fall several months behind on your payments, the lender will repossess your property and sell it at a public option.
If you find yourself behind on mortgage payments for your rental property in Los Angeles, here are some things you can do:
Option #1: Get A Mortgage Refinance
Refinancing allows you to pay off an existing loan and replace it with a new one. By this option, you can lower your monthly payment, obtain a lower interest rate, or shorten the term of your mortgage.
However, to be eligible for a mortgage refinance, you usually need to have a credit score of at least 620. Your debt-to-income ratio must also be 43% or less.
Also, the option of refinancing costs 3% to 6% of your mortgage’s principal. By choosing to refinance your mortgage, you might end up recovering the cost with your savings generated by a lower interest or a short term. This might not be the best choice for catching up on mortgage if you’re not planning to stay at your home for long.
Option #2: Apply For A Mortgage Forbearance
A mortgage forbearance program allows you to temporarily suspend or reduce your mortgage payment for a set period without incurring additional fees or interest. In return, you have to pay a lump sum or installments when the agreed period ends. While you are in forbearance, your record indicates that you are current on your mortgage.
This option is ideal if you couldn’t afford mortgage due to a temporary financial issue, like a job loss. However, be prepared for paying more interest, especially if you’re stretching your mortgage for a long period of time.
Option #3: Negotiate The Terms Of Your Mortgage
You also have the option to call your lender and apply for a loan modification. Unlike a mortgage forbearance, which is temporary, negotiating with your lender allows you to permanently change your existing home loan terms.
You may be able to extend the loan term and reduce the interest rate, depending on the loan program. Your monthly payments will be more affordable, but you won’t need to qualify for a new mortgage or pay closing costs.
Option #4: Sell Your Property
If you don’t see your current situation improving, another option is to sell your rental property. Just make sure that the fair market value of your home is greater than what you owe on your home loan. That way, you can use the profits of the sale to pay back your lender.
By choosing this option, you can sell your property in two ways. One is by going the traditional method of selling, which is putting your home on listings and hiring a real estate agent to help you negotiate a sale. If you don’t have the financial capacity to hire an agent and pay for repairs and remodeling, then opt for a cash home buyer. These buyers examine the home and appraise its value, which they will offer for cash. You get your money right away instead of waiting for months for a buyer.
However, this option is available only if the lender hasn’t foreclosed your home. Be sure to examine your current financial situation and sell your house when you anticipate that you’re close to foreclosure.
The current circumstances might have you struggling to pay your mortgage for months. However, with several options, you can catch up with your payments and keep your home.
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