Worrying about meeting your mortgage payments and the possibility of default is a gloomy situation, compounded by the high levels of foreclosures across the country. Proactive steps need to be taken early to avoid default which can lead to serious consequences. Temporary financial problems are easier to deal with than long term prospects of mortgage difficulties, resulting from unemployment or illness, but both can be approached in similar ways.
The first step is to make an immediate assessment of your overall financial picture. Cutting back on all unnecessary expenditure and prioritising the mortgage payment over any unsecured debt is necessary. Whilst this may provide temporary relief it may not suffice long term unless income is increased as well.
A very viable option is renting a room in your home for additional income which could be used to lessen the mortgage burden. Other ways to increase income should be explored, as the key to managing debt is to reduce expenditure and increase income. Savings can be also be utilized to cover mortgage payments.
If you are unable to tackle the problem in this way it is imperative to contact your lender and discuss options before you miss a mortgage payment. It is important to remember that defaults which lead to foreclosures are a costly business for the lender. The mortgage issuer is better served by working with you to find a solution. They are far more likely to be willing to do so if you approach them early and in a professional manner.
Lenders may be willing to discuss temporary solutions such as loan modification or forbearance. Options to take a payment holiday or extend the term of your mortgage exist. A simple way to reduce the payments is to ask your mortgage lender to reduce the interest rate on your mortgage if that would make the prospect of default loss likely.
If they are unwilling to do so then mortgage refinancing is an option to reduce your interest rate and secure lower payments, but it is an expensive option which may be avoidable if you can negotiate successfully with the lender.
If you have equity in the property is worth considering selling the home and either downsizing or renting until your finances improve. This option protects your equity which would be significantly reduced if foreclosure was the outcome of defaulting on your payments. Unfortunately those with negative equity will not benefit from this and have little prospect of securing a refinancing, thus leaving loan modification their best option.
There are solutions available which can prevent you defaulting on your mortgage but they involve putting an effort in. The one course of action which should never be pursued is ignoring the problem or your mortgage lender.