In the midst of a devastated housing market having a home that is not underwater or in default is becoming a rare sight. For some of us managing our mortgage payments is still achievable, but is out of reach for many others. The key to avoiding foreclosure when finances become tight is preparation. Having a plan in place before your income is lost or unforeseen situations arise is the best way to prevent mortgage debt troubles.
Most people never even consider the idea of renting out their home at a time like this. In fact, the rental market is booming and it is now become quite common to get a lot more for your home as a rental. If you can’t afford to stay in your home because of high mortgage payments, consider renting out the home. In most cases, you can charge more in rent than you owe in mortgage payments, leaving you with a little extra to go towards paying taxes or saving.
No one wants to be forced into giving up their home so if renting isn’t for you, consider refinancing the mortgage. The key to refinancing is to apply long before any trouble sets in. Refinancing a mortgage is an option for those who are still in good financial standing and can afford to pay a little extra in closing costs with the new loan. However, lowering your monthly payments early is a good way to stay out of the threat of delinquency.
For those who don’t find renting or refinancing an option, a mortgage loan modification may be helpful in lowering monthly payments. In some cases, you may be able to suspend payments or secure a long-term monthly payment reduction. However, loan modifications can be challenging and not all lenders are as flexible with their options. The best way to secure one is to apply as soon as financial trouble sets in, but before you miss a payment.