Risks of Not Paying your Mortgage

A mortgage is the biggest financial commitment made by most of the people in their whole life. Having a roof over the head is the first and the foremost requirement of any being. Deciding which mortgage to take, what type of repayment plan and the interest rate is a very difficult process indeed. But, it’s just the beginning. Once you have the loan in your hand, the repayment starts which is far more difficult than any one expects. Imagine a single bad event, disease; loss of job, divorce can make you default on the loan which can put your house on risk.

There are many risks involved when you give your house as security for a loan. The worst of these risks is the foreclosure.

Foreclosure
Defaulting on the loan payments over a long period of time invites this curse. What you will loose? Your own house. Legally this term means that if you default on monthly payments, the lender has a right to repossess the house. The lender sells the house and uses the money as a compensation of his loss. This is not only a loss of your house but your credit rating will also get badly affected.

Mortgage shortfall
This is a red sign for all those poor folks who are dealing with foreclosure. People are of the view that when their house is repossessed their debt is over and they can go looking for a fresh start. Unfortunately, the story doesn’t end here. If the house is sold for a lesser amount than the mortgage itself then the total outstanding debt left, including monthly payments till sale of the house, real estate company charges and interest, is known as mortgage shortfall. A mortgage lender can pursue a borrower for this money for 12 years. You can see how much trouble you will get in the form of phone calls, letters, and creditors on your door steps and above all loss of money and time.

Do you have options?
Yes.  You have options to avoid such troubles. First make a realistic plan of repayments and spend your budget accordingly. If some how you are unable to make payments you can do the following things.

Special forbearance
Try to setup a new repayment plan. This repayment plan can include offset mortgage and flexible current account. If these options are agreed upon you are allowed to make lump sum payment, you can draw back these payments, you can stop until your finances are back on track and you can pay a smaller amount one month and pay extra the next month.

Pre-foreclosure sale 
This option allows you to sale your house for a lower amount before repossession. The amount received can be given directly to the lender. The repayment amount left can then be given back in monthly installments or according to any repayment plan. The usefulness of this sale is that you avoid foreclosure and eliminate the risk of getting your credit report damaged.

Partial claim
To get back on your feet you may qualify for a small interest free loan to make your mortgage current.

Don’t default on repayments and if you are having any difficulty immediately tell your situation to your lender. You should not take any risk with your mortgage.