What to do if you’re struggling to meet your mortgage payments

If money is tight for you right now and you feel like you are running very fast just to stand still, take some comfort in the fact that you are not alone.

The effects of the global economic recession have caused many people, including middle and high-income earners, to face financial difficulties. Many Americans right now are struggling to keep up with mortgage repayments.

There are ways to deal with this challenging situation though, including taking advantage of any savings or bonds that you may have tucked away.

In tough economic times, the ability to keep a roof over your head is normally the number one priority. Defaulting on even a single mortgage repayment can cause huge problems.

According to published statistics, the average American family is just under $18,000 in household debt, with the house value at around the $160,000 dollar mark.

Of this $160,000 dollars, the family owes $95,000 dollars to the bank and as the average American household income is just $43,000 dollars, the math does not look promising.

However, this typical American family has just under $4,000 dollars in the bank and some have bonds or other assets. If this is the case for you, consider using these resources rather than missing any mortgage repayments.

Whilst it may seem a little unjust that ordinary people are paying for the mistakes of others, using your bonds or savings can be a lifeline, however painful it may be to release your bonds and hard earned money for this purpose.

If you do not have savings or bonds, or have exhausted these options, consider other items of value you may have and can use to fund mortgage repayments in the short-term.

Check your budget for income against expenditure and calculate the minimum total you would need for basic bills to be paid. Put secured debts at the top of the priority list.

Secured debts are essentially those that are tied to an item that may be repossessed should you not keep up payments. Your house and car are the main ones.

If you have equity in the house, meaning that your home is valued above the price of your mortgage, you may be able to remortgage to raise money to pay your mortgage payments.

This refinancing option can solve your mortgage crisis but of course many homeowners are in negative equity and so would not be able to access this type of arrangement.

The Federal Trade Commission suggests contacting lenders immediately should you have trouble making mortgage payments. They state that many companies are sympathetic to the difficulties citizens are facing financially.

For some banks and lenders, it makes more sense to lower your repayments to a figure you can afford for the short-term. If the house has negative equity and foreclosure is enforced, there is no guarantee they will receive an adequate amount.

Instead, you may be offered a financial agreement to pay less for a specific length of time. Be aware that this will negatively impact any future credit report, although this may be the best solution overall.

Using a Mortgage Calculator

If you are interested in getting on the property ladder or moving up, you will need to know how much you can borrow and if you can afford the monthly repayments. A mortgage calculator is a vital tool that will give you a guide to what you can afford before choosing a specific product or mortgage provider.

There is a variety of mortgage calculators available depending on how accurate you want your answers.

A basic calculator will give you a rough estimation on what you would pay each month depending on the loan amount, term and the interest rate. These provide a very general guide and should be followed up with a full calculation of costs before any commitment is made.

If you have found a few deals you are interested in and want to compare the options, a more complex calculator should be used. To use this calculator you need to know what the mortgage is for i.e. buy to let, remortgaging, first time buyer etc. You then need to decide what the value of the property you have found is and what your personal credit situation is i.e if you have a good credit history or have had CCJs or been declared bankrupt. Lastly, you need to enter some personal details and the calculator will give you a quotation and a recommendation.

Most lenders tend to have both forms of calculators on their websites for potential customers to use for free. The simple calculator should take less than 5 minutes to give you an estimate of what you can afford to borrow and repay. The more complex calculator will take up to 30 minutes and if you are happy to proceed the provider will give you an “offer in principle” based on the details you have provided.

The offer should detail what fees are involved but you should make an appointment with a mortgage advisor to understanding what the full terms of the mortgage offer are and if there are any other penalties or fees involved.

Sell Your Home for Quick Cash and Rent it Back

What stopping you from selling your home for quick cash? Are you not comfortable with the idea of moving out of your home? Nobody wants to move out of their dream home! But think practically – if you are behind your mortgage payments and your creditors are going to court, then you will lose your home down the line. Sell and rent back can be a good option for you indeed.

If you are going to sell off your house due to any other reason, then also the rent back plan remains valid for you. You do not need to move out of the house – just sell it to a cash buyer and take it on rent from them instantly.

Benefits of the Sell and Rent Back Plan:

People who are going to sell their properties because they do not have any other way out, can understand the benefits of rent back house option offered by the cash buyers.

1] The first benefit is you get a lump sum amount in hand by selling off the property. No need to hire a property agent and pay them commission. No need to renovate the house to attract prospective buyers. You just sell off your home in a hassle free way.

2] You do not need to move out. As you go with the sell and rent back house option, you can stay in the same house as a tenant for as long as you want or as long the agreement allows. No need to look for a new house, no need to relocate to a new locality and make considerable changes to your lifestyle.

3] No need to hire a packer and mover. You can save a lot of money, time and effort this way.

4] No need to pay commission to the property agents to help you sell your house and to help you find a rented apartment.

5] Most importantly, many cash buyers offer ‘buy back’ option. If you keep staying in the same house as a tenant, you are in a constant touch with the owner. Whenever you get money in hand and you are in a position to buy it back, you can talk to the owner and get back the ownership of the property.

If you work with a property agent, you cannot get such benefits. Property agents just help you find a buyer and once you sell the house you simply lose the ownership. Rather, find out a cash buyer that offers rent back home option.

Bio: Melissa is a freelance writer and blogger; she writes articles for Fast Property Solutions blog and many other financial websites and blogs.

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