Stay out of foreclosure

A: I emphatise with you, but depending on the relationship with your bank, things could go either way. Here’s what you do if you miss a mortgage payment.

Perhaps the biggest fear any homeowner can have is foreclosure. A foreclosure occurs after a homeowner is late, or misses with a mortgage payment. To collect the remaining debt, the lender might post a foreclosure sale notice on the house and it is put up for public sale. But this is often a last resort.

In the US while the Mortgage Bankers Association reported in its most recent National Delinquency Survey that the number of loans in foreclosure was at 1.16% — its lowest level since 2000 — that percentage could increase substantially as the thousands of adjustable-rate mortgages that were made during the last refinancing boom begin charging higher interest rates.

A loss of income and other unforeseen circumstances are often reasons homeowners fail to make mortgage payments. But whether you lose your job, become ill, or experience some other hardship, experts say you don’t have to lose your home if you follow these important tips:

Get advice

Potential homeowners should understand property taxes and homeowner’s insurance before they buy. Counselling after the purchase can also help.

Save for emergences

Replacing or repairing things in the home can leave homeowners with insufficient funds to make their monthly mortgage payment. Some suggest establishing a repair fund before you go house hunting, and continuing to save even after the home is purchased.

Maintain your home

Perform quarterly or annual income checkups to make sure everything is in working order. For example, make sure all fire detectors work and that all gutters are clean. This can reduce the number of repairs you’ll have to make.

Reach out for help

If you receive a foreclosure notice, contact your lender immediately and try to meet them to review your budget and discuss mediation options. The problem is that people are afraid to call. Homeowners should contact their lender before their loan becomes delinquent. They may be able to suspend mortgage payments and still maintain good credit.

Know your options

In cases where homeowners can prove a loss of income due to sickness or layoff, they may be able to receive a special forbearance from their lender where the debt is refinanced to lower payments or a repayment plan is established based on income.

The lenders don’t necessarily want the house back, they’re just looking for solutions.