Financial hardship can happen when you least expect it. A job loss, medical emergency, natural disaster, or other unforeseen event can quickly put stress on your household budget—and your ability to keep up with mortgage payments.
If you’re a homeowner facing financial challenges, it’s important to know this: you are not alone, and you do have options. Understanding those options early can help you protect your home, your credit, and your financial future.
Missed a Mortgage Payment? Act Quickly
If you’ve missed one or more mortgage payments—or think you might soon—the most important step is to contact your mortgage servicer as early as possible. Your servicer may offer mortgage-relief programs designed to help homeowners get back on track.
When discussing your options, be sure to ask how each choice may affect your credit score and long-term finances.
Mortgage-Relief Options to Ask About
Depending on your situation, your mortgage servicer may offer one or more of the following solutions:
Forbearance
This option allows you to temporarily pause or reduce your mortgage payments, usually for one month up to a year. Interest continues to accrue, and repayment happens later—either through a payment plan or at the end of the loan term.
Deferment
With deferment, payments may be delayed for an extended period—sometimes up to 36 months. The missed payments are typically repaid in a lump sum at the end of your loan.
Loan Modification
A loan modification permanently changes the terms of your mortgage. This could include a lower interest rate, a longer loan term, or rolling missed payments into the loan balance to reduce monthly costs.
Reinstatement
If your hardship was temporary and you’ve regained financial stability, reinstatement allows you to pay the full past-due amount—including late fees—to bring your loan current.
Refinancing
If interest rates are lower than when you originally purchased your home, refinancing may reduce your monthly payment. This option depends on your credit and equity, but it’s worth exploring.
What If You Can’t Catch Up on Payments?
For longer-term financial hardship, other paths may be available:
Selling Your Home
If you have enough equity, selling your home may allow you to pay off your mortgage and move forward without long-term financial damage.
Short Sale
If your home is worth less than what you owe, your lender may approve a short sale. In some cases, the lender may forgive the remaining balance—but it’s critical to get a written deficiency waiver. Keep in mind that forgiven debt may be considered taxable income by the IRS.
Foreclosure
Foreclosure allows the lender to recover the debt by selling the home. Laws and timelines vary by state, but foreclosure typically begins after a homeowner is 120 days or more behind on payments.
Deed-in-Lieu of Foreclosure
This option allows you to voluntarily transfer ownership of the home to the lender in exchange for cancellation of the remaining mortgage debt.
Hardship Due to a Natural Disaster?
If your financial hardship is related to a natural disaster, additional relief may be available. Mortgage servicers often offer special forbearance programs, and homeowners with FHA-insured loans may qualify for relief following a presidentially declared disaster.
Always confirm with your servicer that your loan is officially in forbearance before stopping payments.
Where to Find Trusted Help
Navigating mortgage hardship can be overwhelming, but reputable assistance is available:
- A REALTOR® can help you understand your options and connect you with trusted local resources, including attorneys and housing counselors.
- REALTORS® with the Short Sales and Foreclosure Resource (SFR®) Certification have specialized training to assist homeowners in distress.
- HUD-certified housing counselors offer free or low-cost guidance to help you explore solutions.
- State-run mortgage relief programs, nonprofit organizations, and even some homeowners associations may provide emergency assistance.
Beware of Mortgage-Relief Scams
Unfortunately, scammers often target homeowners during difficult times. Be cautious of anyone who:
- Promises guaranteed loan modifications
- Asks for upfront payment
- Tells you to stop communicating with your lender
Legitimate mortgage relief assistance should never require upfront fees. The Federal Trade Commission provides helpful information on identifying and avoiding scams.
Why Working With a REALTOR® Matters
Your real estate professional plays a key role in helping you navigate both buying and selling decisions during challenging times. Only members of the National Association of REALTORS® may use the term REALTOR®, and they are bound by a strict Code of Ethics that requires them to act in their clients’ best interests and treat all parties fairly.
For more consumer resources and housing information, visit facts.realtor.
Source: NAR Consumer Guide
