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What To Do If You Can’t Afford Your Mortgage Payments

Having trouble finding enough money to make your regular mortgage payments? For obvious reasons, your mortgage is a debt you don’t want to disregard. Fall too far behind on what you owe, and your lender could be in position to foreclose, meaning they can take possession of your property.

There are all kinds of reasons why a homeowner may suddenly have difficulty paying their mortgage, whether it’s the result of rapidly rising interest rates, a loss of income, or a combination of these and other financial factors.

If you’re in that stressful situation and wondering what you can do, it’s important to know that there are options available to you. Likewise, it’s always smart not to let your mortgage problems linger. Consult with a trusted professional, consider your choices, and take swift action to protect your property investment.

Here’s a look at some of the options available to anyone struggling to afford mortgage payments.

Change your spending habits and behaviours

Understanding the reason for your mortgage woes is a key part of fixing the problem. For some borrowers, the reason will be due to circumstances beyond their control, such as job loss or interest rate hikes. However, if there’s anything else about your spending behaviour that you can scale back or eliminate in order to more easily make your mortgage payments, now’s the time to identify those avenues for change. If the problem is due to other factors, you’ll need a different strategy.

Consider a short-term deferral

If you can reasonably expect that your financial hardship won’t last too long, one strategy is to ask your lender for a temporary mortgage deferral. These arrangements allow lenders to pause their payments for a fixed period, usually three to six months.

While deferment gives borrowers a break from their payments, interest charges don’t completely disappear. Instead, they add up in the background and get tacked on to your mortgage total. To account for this, your mortgage payments will be slightly higher once you resume making them.

In some cases, rather than deferring payments, borrowers and lenders may instead agree to temporarily reduce the size of payments. This type of agreement is commonly known as forbearance. For borrowers, continuing to pay a reduced amount lessens the impact of additional interest charges over the lifespan of their mortgage.

Extend the lifespan of your mortgage

Another way to tackle mortgage problems is to reduce regular payments by refinancing or spreading your remaining debt over a longer amortization period. In the long run, this strategy will add to your total interest burden by prolonging your mortgage payments for additional years, but it can offer immediate relief if needed.

Switch from variable rate to fixed rate

If your mortgage costs have climbed because you have a variable interest rate that kept shooting up last year, you may be tempted to consider the cost certainty of a fixed rate mortgage instead. There’s often a penalty cost associated with changing from variable to fixed, or vice versa, before your mortgage renewal, but the switch could be worth it if your new rate is more competitive. Talk to your lender to see what’s available and do the calculations to make sure this strategy will pay off for you.

Consider renting out some (or all) of your property

One way to help address cash flow concerns is by becoming a landlord. Taking on a tenant can be an ideal way to help cover costs associated with property ownership. Whether you share your home with a renter or move out entirely and turn the whole place over to tenants, it’s possible to generate enough income to cover your mortgage payments. Be aware, however, that becoming a landlord is likely to increase other costs, too, such as insurance, utilities, and maintenance.

Sell and downsize

A final option for seriously cash-strapped homeowners is to sell the home they’re struggling to pay for and move to a smaller or more affordable property, possibly in a new city or region. While this approach may be seen as drastic by some, it’s certainly a far superior option to facing the threat of foreclosure.

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