Unable to Pay Your Mortgage? Steps to Make an Action Plan (2024)

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.

• When you miss a mortgage payment, you incur late fees and hurt your credit score.
• After three missed payments, your lender can start the foreclosure process. You may lose your home.

• Before missing payments, call your loan servicer to talk about alternatives that may be available.

If you lose your job or face some other financial hardship, it may be difficult to pay your bills, or even cover your mortgage.

But skipping mortgage payments comes with serious consequences that could include losing your house.

Are you finding it hard to make your monthly mortgage payment? Here's what to know about missed payments — and some alternatives that may be available.

If you're having trouble paying your mortgage, you need to act fast, as consequences can be serious for missing a payment. You may face a hefty fee or your lender could even foreclose on your house. To prevent this, you should:

Assess your financial situation

If missing a payment is a real possibility, sit down and look at your bank account and expenses. Is there somewhere you could cut corners for a while and free up some cash? Do you have a savings or investment account you could potentially pull from?

If you're regularly having trouble making your payments, it might be time to consider changing jobs or increasing your hours. Talking to a financial planner or credit counselor may be able to help, too.

Contact your lender as soon as possible

If you think you might have an issue making your payments, call your loan servicer right away.

"Be proactive in engaging your servicer," says Craig Martin, managing director and global head of wealth and lending intelligence at JD Power. "There are different options available, and waiting is not likely to improve your situation."

The best strategy is to call before missing any payments. If you wait until after, your lender may be less willing to work with you.

Understanding your options

There are lots of mortgage relief options for homeowners struggling to make payments. Are you having a hard time paying your mortgage? Here are four strategies for mortgage payment difficulties to consider.

Forbearance agreements

One option is to call your loan servicer and ask about forbearance. This allows you to pause your mortgage payments for a certain amount of time or, in some cases, make reduced payments instead.

There is usually no fee or penalty for this, and you won't be charged any additional interest during the forbearance period.

However, you will need to repay the missed payments eventually. Your lender may allow you to set up a repayment plan and spread those costs out over time, or you may need to pay it back all at once. You also might be able to defer the missed payments to the end of your loan term. Your lender will contact you toward the end of your forbearance period to discuss options.

Loan modification programs

Modifying your loan may also be an option. This is when your lender agrees to change the terms of your loan to make it more affordable. It can include extending your loan term, reducing your interest rate or, in some cases, even reducing your loan's balance.

"If you're experiencing financial challenges, you may consider a mortgage modification to adjust the terms of your loan to ease the financial squeeze," says Christian Mills, formerly a home equity conversion mortgage (HECM) loan specialist at Reverse Mortgage Funding. "You may be able to extend your repayment term or lower your interest rate, depending on the options your lender is willing to offer."

Refinancing options

Refinancing can allow you to reduce your monthly mortgage costs, making the payments more affordable.

For this strategy to work, you would need to qualify for a lower interest rate than you have on your current mortgage loan, or you would need to refinance into a longer-term loan. This would allow you to spread your balance out over more months, thereby reducing your payments.

Keep in mind that refinancing does come with closing costs. Freddie Mac estimates that these run around $5,000 per loan. Some lenders may let you roll these closing costs into your loan balance. But remember: This will increase your interest costs in the long run.

Government assistance programs

Government housing counselors can also help and guide you toward the best path forward. There's usually no cost for this service.

If you're not sure where to find a counselor near you, the US Department of Housing and Urban Development's online search tool can help. All results are HUD-approved counseling agencies. You can also call the HOPE Hotline at (888) 995-HOPE to connect with a counselor who can help.

Communicating with your lender

Talking to your lender or servicer early on in your payment struggles is critical. Are you planning to contact your lender soon? Here's what to do.

Preparing for the conversation

Before calling your lender, you'll want to have some important details on hand — like how many payments you've missed, the total overdue amount, and how much you make each month. You should also have a rough idea of your monthly expenses and how much you have in your checking account, savings account, and any other assets you own.

You should also be prepared to explain why you've missed payments and whether the issue is going to be temporary or permanent, as this will play into what options they can offer you.

What information to provide

When you talk to your lender, they'll ask you questions about your finances and your challenges with making payments.

They may also ask you to fill out a mortgage assistance application and submit documents like bank statements and pay stubs. You will also need to provide a written statement explaining your hardship. The lender will then review this and present you with options.

Avoiding foreclosure

If you think you won't be able to make a monthly payment, call your mortgage servicer as soon as you can. They may be able to work with you.

"In general, servicers and lenders view foreclosure as a last resort," says Craig Martin, managing director and global head of wealth and lending intelligence at JD Power. "It's very costly and can be a long process which they prefer to avoid."

See below for what to do if your lender does move to foreclose on your house.

Steps to take when facing potential foreclosure

The first thing to do if you're facing foreclosure is to call your servicer and ask about any last-ditch options. They may be willing to do a short sale, which allows you to sell your home for less than you owe on the mortgage, or a deed-in-lieu of foreclosure. With these arrangements, you hand over your property to the lender and avoid foreclosure. This helps you keep the foreclosure off your credit report. In some cases, your lender may also cover relocation expenses.

If these aren't options, get in touch with a local attorney. Foreclosure is a legal process, and you'll want someone on your side to guide you through.

Legal rights and protections for homeowners

There's a process your lender or servicer must go through before they can foreclose on your house, so they can't just take your home tomorrow. If you miss payments, you'll be contacted about paying those — plus any late fee that's assessed — usually by phone and via letters in the mail.

After this, you'll receive a Demand Letter or Notice to Accelerate. This will give you 30 days to catch up on payments.

If you still fail to bring your loan current, your lender will schedule a sheriff's sale or public trustee's sale, which is when they'll sell your home to recoup their losses. You should receive notification of the sale date via mail and with a notice taped to your front door.

If this happens, there may still be a way to reclaim your home after it's been sold off — at least if your state has a redemption period. To do this, you may need to pay the overdue amounts, your lender's attorney's fees, added interest, and other costs.

Long-term financial planning

Proper financial planning is critical if you want to stay on track with your mortgage payments — or any bills, for that matter. If you're having trouble making payments, see the following financial advice for struggling mortgage payers.

Budgeting and financial management strategies

The best strategy is to avoid missing mortgage payments in the first place. To do this, make sure you have a healthy emergency fund. This ensures you have the cash to cover your payment if you lose your job or are struggling financially.

You should also have a good household budget, and make sure your credit score is strong, too. A good credit score will give you more options, such as refinancing, if things go awry.

Seeking advice from financial counselors

If you're having a hard time paying your bills, you may want to consult a financial professional. They can help you put together a budget, devise ways to cut expenses, and ensure you have a plan for paying your mortgage and other household bills on time.

FAQs