Consumers rarely sign into a 15 or 30-year mortgage with the intention of defaulting on the loan leading to the foreclosure of a home. There is simply a chance that you or someone you know lost a form of income or miscalculated the costs monthly of maintaining a home. A percentage of buyers do take the maximum amount a lender will give them without considering other costs. The maximum amount that you can borrow is often based on wise spending in other areas. Options do exist when you foresee a financial disaster occurring in the coming months. Below are a few options that you can consider when you see upcoming mortgage payments that you simply will not be able to cover.
Sell the Home to Stop the Eviction Process
Selling the home before you have missed payment could be the best course of action. If you have a home in a hot market this will be the way to regroup financially. Downsizing might be best but you need to make sure you receive the equity put into the home along with your down payment back. Putting expenses on a zero percent APR credit card can keep you afloat during this process without putting you deeper into a financial hole. Staging the home will help create better offers and there is a chance you receive multiple offers well above asking price! The right real estate agent that works directly with a specific lender. This can help expedite this process although it will still likely take a few months.
Pick Up Extra Shifts/Start Working a Freelance Gig
Seeing that you are slowly draining your bank account can lead you to tighten up your budget. Staying at the same balance month after month will allow you to pay your mortgage. There is a chance that you will have to pick up extra shifts at work but this is not an option at all places of employment. The freelance economy is booming with people of all skill levels available to earn supplemental income. For people that have writing or web design skills, there is a healthy market of companies willing to pay well for projects completed. Take a few lower-paying contracts to build a reputation then you can increase your hourly/by project rate. The potential of earning daily from the comfort of home should appeal to everyone. This should especially interest those that will be running into financial peril in a few months.
Refinance Your Home and Receive Cash
Refinancing your home can be done for any number of reasons. The interest rate could have dipped significantly on home mortgages which makes you want to lock in a lower interest rate. This will help lower monthly bills and at times can allow a family to possibly be able to make the payments. Receiving cash is going to be an option to extend the time that you have to figure out other options to earn income. For those that have been making payments for years, you are going to be able to borrow quite a bit. There is also a chance your interest rate lowers allowing you to save money along with the option to extend the loan.
Rent Out/Put Room on Airbnb
Your home is an extremely valuable asset that can be rented out monthly or on a platform like Airbnb. For those people that have a pool house or in-law suite with a separate entrance, this can be perfect. Most Airbnb guests are polite and their rating system allows for owners to see what previous hosts thought of them. For renters, it is likely better to enlist the help of a property management company. The last thing that you want is a renter in a lease that is constantly harassing you or your family for asking for the rent on time.
Negotiate With Your Creditors
A few bad events or an injury that required hospitalization could have led to your financial problems. If a married couple both lost their long-term jobs simultaneously this can be an option until one or both starts earning a healthy income again. In many cases, creditors will accept payments less than the full debt owed in order to discharge their debt. This can and will damage your credit but will give you enough time to get on your feet. In Ontario, Canada, you need to stop power of sale in a timely manner to make sure you retain possession of the home. Power of sale is a process that mortgage lender uses to recover the money that they are owed. The lender sells the home during this process in order to pay off outstanding debts. Profits that are available after the debt has been paid will go to the homeowners. Many lenders opt for this process rather than foreclosure as it is faster and cheaper to do so. The foreclosure route leaves nothing for the homeowner after the title has been transferred to the lender.
There could be any number of reasons that you have fallen behind financially. In places with high costs of living an emergency fund can dry up if you have no income source. Take the time to consider your options as each unique situation might require a plan of action. Meet with a real estate or legal/financial professional to go over what your options are and what the best choice is for you.
