A mortgage default is when a property owner fails to pay for the mortgage fee that has to be paid for monthly. This defaulting may be caused by various reasons that are beyond the person. There are many risks of defaulting on one mortgage payments. Defaulting on the mortgage has various advantages and disadvantages mentioned below.
Advantages
1.One can simply walk away from the property if they fail to pay for the property rather than spend all their savings trying to pay for the mortgage. This can give the person a chance to escape from all the penalties implicated in mortgage defaulting.
2. The homeowner may have a chance of selling off the property and start all over again elsewhere, especially if they know that they are about to enter the default phase.
3. When the person thinks that they are likely to default for a certain period, they is a chance for them to contact the lender and ask for a an extension of a grace period. One can also negotiate with the lender to revise on the amount of money paid per month to a more comfortable amount that they can pay without straining. The lender would not want to go into foreclosure auctioning of the property so they would most likely be more than willing to help an individual avoid a mortgage default.
Disadvantages
1. Defaulting on the mortgage will cause the property owner to loose the property which will be a big loss to them, all the monies that they pumped into the property will be completely lost.
2. A mortgage default will cause the individual to have a bad credit score which will be a problem for them the next time they are applying for any loan. This also shows a bad record which in future can hinder such a person from ever being approved for a loan.
3. When one has defaulted on the mortgage they will have to start paying the late fees that are accrued when there are no payments on the mortgage and is considered to be in default. This means that the property owner will be forced to pay for all those extra levies fees charged on all late payments.
4. The property will be put for for auctioning once the owner fails to pay for their mortgage as required by the lender or the bank.
5. When the property is put up for auction this will be a bad publicity for the property owner, because everyone will get to know that the individual has failed to pay for their mortgage, which means that they are facing financial hardships.