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You should know your options if you’ve fallen behind on your mortgage. Oregon law allows you to reinstate your loan at any time up to five days before the sale date of your home. This gives you time to come up with a plan that works best for you. If you’re behind on your mortgage, read up on how you can get back on track.
Contact Your Lender
This is the most important step you will take if you want to keep your home. Your lender does not want to foreclose on your home. The stereotype of the mean old banker seizing your home in delight works for dramatic effect in the movies, but it’s just not true. Your banker wants you to make your payments and pay back your debt to them. Keeping you in your home saves the bank time and money, so call them as soon as you realize that you are not going to meet your obligation. Talk to a mortgage team member and explain your situation. Tell them what happened and ask them what your options are.
A common solution offered by lenders is a repayment plan. The bank allows you to pay an additional amount with your normal monthly mortgage payment. A repayment plan will spread out the amount you are behind over future loan payments and is an easy option to get caught up on your payments.
Reinstatement and Forbearance
These two strategies are often used together to help you get current with your loan. Reinstatement is a single lump-sum payment that you make to your bank to bring your loan current. Forbearance is when the bank temporarily reduces or postpones your payments, usually with the understanding that you will make a large lump sum payment to bring your mortgage current.
If you are unable to afford your mortgage, you may have the option to modify your loan. The lender works with you to reshape your loan into one that you will be able to afford. The bank can modify the interest rate on your loan, which will then reduce your monthly payment. In rare circumstances, the bank may reduce your principal. The modification can be permanent or temporary, with the goal being to allow the struggling homeowner to keep making payments to pay off the mortgage.
Depending on the amount of equity that you’ve built in your home, it may be beneficial to refinance your loan. If you have a high-interest rate on your current loan, check into refinancing. A re-fi with a lower rate can dramatically reduce your monthly mortgage. However, refinancing as soon as you realize that you are unable to meet your current obligation is optimal as your credit will take a hit with each missed payment, making you ineligible for the best interest rates. Again, talk to your lender for advice on rates and loans available for you.
The Bottom Line
Many folks are afraid to contact their lender. There is no doubt that it is very frightening, but above all, remember that your lender has the same goals as you. The bank will want you to bring the loan current so that you can keep your house. Your banker doesn’t want the time and expense of foreclosing on your home. Let the bank know if your financial setback is a temporary one. He or she will want to work with you before you get too far behind on your mortgage. Whatever your needs, your lender wants to help you keep your home and he or she has the information and the tools you need to help you get back on track.