If you have defaulted on a loan or in other words stopped making payments on your mortgage it is considered a bad mortgage. Just as there are multiple reasons for getting into trouble with your mortgage, there are multiple ways to get out of it. Some reasons may be losing your job or unexpected medical expenses, an Adjustable Rate Mortgage (ARM) adjusting to a higher rate than expected, among others.
If your mortgage is in default because of adjusting payments, the best method is to attempt to refinance to a fixed rate mortgage. It may be necessary to sell your home if you have lost or job or have taken out a mortgage with monthly payments that exceed certain income thresholds.
There are government programs that may be helpful to refinancing or modifying your mortgage, if you meet the requirements. With a loan modification you may be able to get your monthly payments reduced so it is easier to stay current with your payments. You need to apply for a loan modification and meet certain guidelines to qualify for reduced payments.
It is also important to take a look at your spending and see if there are categories that can be cut down on or cut out completely. Cutting down on expenses may seem like a major sacrifice but it may be worth it if it means being able to keep your home.
If you need to sell your home and owe more than the house is worth you may need to do a short sale. With a short sale, the bank will agree to sell the house for less than it is worth and in many cases will forgive the difference between what you owe and what it sells for. It is wise to get legal and tax advice before considering a short sale. Even though you get out of your mortgage you may have tax implications.
If you are having difficulties making your monthly mortgage payments it is important to contact your lender as soon as possible to let them know. In many cases, the lender will be willing to work with you to stay in your home. It is also to their advantage, to save the time and extra expenses of going through a foreclosure. It costs them extra money to maintain the home while it is going through foreclosure.
If you have defaulted on your mortgage, there are various ways of getting out of a bad mortgage depending on the reason why it went bad.