Every day clients call us asking whether they should continue making mortgage payments. Our clients wonder if it’s worth it to continue paying the mortgage company, when they know it’s just a matter of months until they will begin missing payments.
As times get complicated the first thing you need to do is decide which bills are important. It’s very hard to keep making payments on a home that you know you’re going to lose. My personal policy is to never tell someone to pay or not pay their loan. Instead I try to educate the clients of the plausible things that can happen from making or not making a house payment.
In most cases, when you are trying to get a short sale or workout plan with a mortgage company, it’s better to be delinquent on mortgage payments. But it’s not an absolute requirement. In most cases, mortgage companies don’t want to give you a better deal when they know making the existing mortgage payment is possible. But if you can prove the existing payment is out of your reach and that a lower payment would be affordable, you can get a workout plan approved. In fact, some government bailout plans require you to be current on your mortgage. Still, other government plans require you to be behind on payments, so you really need to figure out what modification plans you are likely to qualify for.
When you are capable of keeping your loan payment up to date, while maintaining your basic family necessities, then it’s usually a good idea continue making your payments. By keeping your payments up to date, you will avoid damage to your credit report and you don’t have to worry about foreclosure or other penalties and fees. If you don’t make your payments, your credit report score will decline drastically. But you will be able to hang on to your savings, which you will need to help avoid foreclosure. Another downside of not making your payment is all the fees that will be charged when you get behind. This may not end up being a big deal if you are able to eliminate the arrears or get a short sale, but if you end up being required to pay the total amount owed to keep your home, these fees can really add up.
Ultimately, it’s up to you to decide if making your mortgage payments is even possible. But if I were up against foreclosure and I could afford my payments, (even if I had to make sacrifices elsewhere) I would try to keep making them. But, I would not deplete my savings or retirement account to continue paying an un-affordable mortgage.
I hope this information is helpful and as always, feel free to ask for help anytime!