How To Make The Decision When To Stop Paying Your Mortgage
All the time people ask us whether they should continue making mortgage payments. Homeowners can't decide 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 rough families need to prioritize spending. It's very hard to continue paying for a loan on a home that you may possibly lose. My personal line of reasoning is to never tell someone to pay or not pay their loan. Instead I try to inform the clients of the possible things that can happen from making or not making a loan payment.
In most cases, when you are trying to get a loan modification with a lender, it's better to be late on loan payments. But it's not an absolute requirement. In most cases, banks don't want to give you a better deal when they know making the existing loan payment is possible. But if you can prove the current payment is out of your reach and that a lower payment would be affordable, you can get a new loan mod 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 determine what modification plans you are likely to qualify for.
When you are capable of keeping your mortgage payment on time, while maintaining your basic family necessities, then it's usually a good idea continue making your payments. By not missing payments, 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 drop rapidly. But you will be able to save 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.
No matter what you read or hear, it's up to you to decide if making your mortgage payments is even possible. But if I were in 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!
