>No one wants to lose their home to foreclosure. Once you get behind on your mortgage payments it is a very slippery slope to foreclosure where your problems grow quickly and your options become restricted as time passes. How can you reduce your risk of foreclosure? You can mitigate your mortgage risk if you:
The bad news is that no one can perfectly predict their financial future. The good news is that you can respond to many conditions in a way that makes a good financial outcome more probable. Homeowners who regularly monitor the news and other trusted sources for trends in mortgage interest rates and housing market conditions may be able to take advantage of potential opportunities or limit the damage caused by impending problems. Today we are blessed with an abundance of easily accessible sources for financial news and home values so there is really no excuse to not regularly monitor them. In looking ahead prudent borrowers will consider trends in their career planning, insurance coverage and adjust their budgets accordingly. If you know you have a big change in income or expenses on the horizon you should adjust your plans accordingly. Large medical expenses that are not covered by insurance can be a significant challenge for homeowners.
The stress of making on time mortgage payments can be overwhelming when you are dealing with big problems like losing your job, temporary or permanent disability, and high medical expenses. Some people turn inward when faced with too much stress - procrastinating, not opening mail fearing that it might contain more bad news. However, this is the time for decisive action when you must energetically battle your financial demons. Here are some potential problems and opportunities and actions you could considering responding with in order to mitigate your mortgage risk:
If your home equity is in danger of declining, due to a decline in the value of your home or other factors, you may be able to mitigate your mortgage risk by considering one or more of the following actions, as is appropriate to your situation:
If interest rates are rising and you have an Adjustable Rate Mortgage (ARM), Interest-Only ARM, HELOC or balloon payment mortgage, you should:
If interest rates are falling and you have:
If you have an ARM, Interest-Only ARM or HELOC adjusting soon or a balloon payment due soon, consider refinancing your ARM, Interest-Only ARM, HELOC or balloon mortgage to a fixed rate mortgage.
If you have missed mortgage payments, due to poor financial management or other factors, then you need to rectify the situation right away by taking action, including the following:
If you or your dependents are engaging in riskier activity, for example your child is entering his or her teenage years, you could explore compensating by:
If you expect to receive a financial windfall:
If large expenses loom on the horizon, for example medical expenses, explore a wide range of options, including:
The best decision for you depends on your unique circumstances. Invest in educating yourself, consult with people your trust, get out in front of potential problems, and consider your whole financial picture when making decisions.