Getting behind on your home loan and being in a position where you almost lost it due to foreclosure can be an eye-opening experience. You will feel very grateful when you get yourself back on track with this type of loan. It will be a huge weight lifted. However, you also want to take preventative measures to safeguard against any similar situation in the future.
Make it a Priority
While your home is your place to live and your place to take care of your family, it is also the largest expense most households have. Make it a priority to pay for it each month. Don’t be tempted to pay for everything else and let your mortgage fall through the cracks. Strive to have enough for all of your bills. Getting into this routine will make it easier.
Do all you can to reduce your monthly expenses. Changing your lifestyle habits is a big part of this. If you often spend money on eating out or going to the movies, it is time to plan meals at home and to rent movies.
If you have been in that buy it now and pay for it later mindset, you need to let that go. Even spending $2 a day on a cup of coffee can be eliminated and you can make it at home before you go to work says Money Lender Singapore.
The money you do save needs to be allocated for paying off your debts. Pay off your debts with the highest interest rate first.
Pay more than just the minimum monthly payment to help you slash interest and to reduce the amount of time it takes to pay it off. It certainly won’t hurt to contact creditors such as your credit card companies and ask if you can get on a repayment plan or a lower interest rate. You will be surprised to discover how many of them do offer such perks for their customers.
However, they generally don’t advertise that they do so. Another option is to transfer balances to credit cards with lower rates of interest. Just make sure you read the terms of the transfers. If you miss payments, they may increase that rate. If you don’t pay the transfers by a given timeframe, you may have to pay more.
Consider ways to increase household income. If you are a two income household, consider alternating hours so you can reduce or eliminate the cost of daycare. You can also consider trading such services with others you know rather than paying them. Consider picking up an extra job on the weekends or an extra shift per week at your current job.
Sell items you no longer need such as clothing, tools, equipment, and vehicles. Use this money to pay down the debts you have. If you have an expensive car payment, consider trading it in for something less expensive.
Make a budget and stick to it! Your entire household needs to be on board with this. For older children, it can be a life lesson you share with them about money management. Make a list of your income and your expenses.
Then write down all of the extras you have to cover. There may be a need to negotiate those extras to make the funds for them to go far enough. Each household member should get a monthly allowance for extras they want. Once they spend that money, it is gone, and they don’t get more until the next month. You can also decide to allocate a weekly amount rather than a monthly amount.
Part of your overall budgeting should include putting a certain amount of money away each month. You may be saying you can’t do that because you have bills to pay. Yet you need money put aside for unexpected emergencies so you don’t have to use your credit cards or borrow money. Ideally, you want enough money in your savings account to cover three months of your monthly bills.
Once you have that much saved, you can pay extra towards your other bills rather than putting it into the saving account.
Communication with your Lender
If you do have any concerns about paying your mortgage loan with the new terms as time passes, contact your lender. Don’t wait until you are in a situation where you can’t pay or you are facing foreclosure again. Communicate with your lender so you can stay on track with your payments and not be so worried about it.
Don’t Pass up the Benefits
You may be telling yourself it is too much work to apply for a home loan modification. However, there are so many benefits that you will be passing up if you don’t apply and follow through. The biggest one will be you can end up losing your home due to foreclosure. With the loan modified, you can keep your home and get back on track with the payments.
You will also be able to see your credit score improving as it takes a deep dive in points when you are late on your mortgage, especially if it shows foreclosure in motion. With a modified loan, you will have a mortgage payment you can stay on top of based on your current income situation.
This is a significant benefit to you and your overall credit rating. It can give you a clean slate to work with rather than trying to come up with a lump sum of cash to prevent your home from going into foreclosure. Your interest rate may be dramatically reduced during the loan modification process too.
At the very least, it will stay the same. It isn’t going to be higher even if the economy offers higher rates right now or if your credit isn’t very good now compared to when you got your mortgage loan originally. It is possible some of the fees that have been added could be deferred. Most lenders don’t offer this, but you can ask about it and they may credit you a portion of them. It certainly doesn’t hurt at all to ask about it. This amount due will have to be paid at the very end of your mortgage loan, but no interest will accrue on anything that has been deferred.
However, when you complete the loan modification process, any late fees must be removed. Those can’t be pursued by the lender and they aren’t just deferred. They are removed so that does save you money at that point in time.
You may qualify for incentives too if you pay your modified mortgage loan on time for 6 years after you have been approved for it. You will need to talk to your lender about this and if it is offered where you reside and where you have your loan. Such incentives are paid for by the United States Department of the Treasury, and not by your lender.