For missed payments, late fees are often applied. The lender and the terms of the mortgage will determine the amount of the late fees. A late fee may not be applied at the beginning of the mortgage. Some lenders will wait until the payment is 30 days past due before they begin collection.
A defaulting mortgage can lead to foreclosure. However, foreclosure is not an option for lenders as it is expensive and lenders often lose their money during foreclosure proceedings. If the borrower is experiencing temporary financial difficulties, a forbearance agreement could be an alternative to foreclosure. A forbearance agreement allows the lender to temporarily allow the borrower to cease making monthly payments or to pay less than usual.
It is important that borrowers contact their lender immediately if they suspect they will not be able to pay on time. Sometimes, the lender might be able to assist the borrower in avoiding defaulting on their mortgage.
If a homeowner has a delinquent loan but doesn't believe his financial problems are permanent, the bank might agree to a short sale. If the borrower is unable to sell his home due to owing more than the property's value, the bank will allow him to sell the house at a lower price than the mortgage balance. The bank may forgive the difference in some states. In others, the homeowner will have to repay the difference.
Delinquent mortgage payments can have a negative impact on borrowers' credit scores and their ability to get loans in the future. This is why it is important that borrowers make every effort to repay their mortgage on time.
If a borrower has been in default for several months, or even years, but has not had their home foreclosed upon, the lender may agree to a payment plan to help them get current on the mortgage so they don't lose their home. A lender may also be willing to modify the loan, changing the principal owed, length of the loan, or the interest rate in order to make monthly payments affordable. Refinancing to an adjustable-rate mortgage could be an option.
A foreclosure prevention counseling service may be able help you if you are having trouble deciding what to do. These services are provided free of charge by non-profit agencies.
