What Does it Mean to Default on a Mortgage

Posted On Monday, 26 October 2020 14:21

Everyone who had taken a mortgage before knowing the importance of having timely payments. In life, we will always experience ups and downs. The world we are now living in isn’t the same as that of a prince or a princess. In reality, we don’t believe in a happy ever after. So, if you don’t want to get jailed in a lonely tower, make sure that you will pay your mortgages on time. 

In some cases, individuals are filed with mortgage defaults. This is because of not paying their borrowed money in a timely manner. The following are the important things you need to know to prevent yourself from dealing with this unfortunate situation.

A Brief Explanation to Mortgage Loan Default

Mortgage loan default is possible if you did not make a payment in a fixed time span. This is a very sensitive and unfortunate case, as it can harmfully affect your credit score. When your credit score is bad, it would be hard for you to get future credits. What’s worse is that mortgage default can also take away your house or other properties as payment.

You can also be in a default situation if you are using your house for dealing drugs or any other illegal activities, if you are not paying proper taxes, or you don’t have homeowner’s insurance. In other words, a mortgage loan default can happen in different and most unexpected ways.

What Will Happen If You Didn’t Pay Your Mortgage?

Paying a mortgage loan has an extension. For example, if your payment due is in September and you can’t do it, you still have 30 days or one month to pay your mortgage. Keep in mind that the time frame past due will always depend on the preference and contract made by your lender. 

If you can’t pay your mortgage loan in the allotted time made by your lender, he or she will give you notifications about the possible default. If you do not respond to this notice, your lender will automatically send you several notices, such as messaging you or calling you, to make sure that you are receiving all the notices he or she is sending.

We know that receiving constant notice from your lender is quite annoying. But you should not ignore them, because if you do, you made the worst mistake that can put your life in its worst situation. To prevent this from happening, you should respond to these notices and pay your loan mortgage on time.

Rather than ignoring these reminders, you should talk to your lender about your payment. Through this, you can prevent mortgage loan defaults. In addition to that, speaking up about the payment can help you in different ways. These include having a good image with your lender. If you will pay on or before the due, your lender would probably think that you are a good player. Aside from that, it can also maintain your intact credit score while reducing your stress about money. Not only that, if you have a good credit score, you can still make loans in the future without having problems.

Mortgage Loan Default to Mortgage Loan Foreclosure – What’s the Difference?

As mentioned, if you won’t speak up about your loan payment, mortgage default is not the worse situation you will be into; it’s the mortgage loan foreclosure. If you didn’t pay your debt for the next 120 days or three months after the due, your lender would file you with a mortgage loan foreclosure. This is the time where you will no longer be declared as the owner of your home, but the lender himself or herself. Once your lender takes away your home custody, he or she will find someone who will purchase it. Once your mortgage loan is declared to be in foreclosure, you can’t do anything but get all your things and leave.

Take note that mortgage loan foreclosure can affect your credit history for more or less seven years. Thus, you might find it hard to avail of a new home after this scenario. What’s worse? Your lender would also ask the help of the IRS team to file you a case regarding the damages you did to him or her if your home is liquidated because of resale and foreclosure. 

How to Avoid Default and Foreclosure of Mortgage Loan

One of the important things you can do if you are having trouble regarding your financial status with your mortgage loan is to discuss it with your lender. Explain to him or her that you have a hard time paying your home loan in the time span given. 

Discuss your reasons behind not paying your mortgage loan on time. Most lenders are understandable and could probably help you out from this situation. If you find it hard to make the payments on time, make sure that you will talk to your lender about your situation and let them understand your reason. 

Talking to them regarding your current situation is the best thing that you can do to prevent your mortgage loan from being default or foreclosure. This is because if this happens, you will shoulder a big problem a man could have. 

So, what can you do to prevent mortgage loan default or foreclosure? Approach your lender. Rest assured that by doing so, they will understand you and give you an extension of paying.

Conclusion

Taking a mortgage loan is a big responsibility. Before you apply, assess yourself whether or not you can pay it before or on the due. As mentioned, we are not in the world of fairytale. You should always pay your debt on time to avoid being jailed. To prevent these things from happening, make sure that you will pay your loan within the time allotted by your lender. If not, try to approach them and discuss the things preventing you from paying on time. You can also look for the other individuals who had experienced having a mortgage loan default and asked them what they did to overcome the problem.

If you’re looking into an overseas mortgage and need a loan- let us know.

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