Unexpected Life Events Can Impact Finances
When life is running smoothly, managing household finances and making monthly mortgage payments are just another part of the regular routine of being a homeowner. Yet, regardless of how well we’ve honed our money management skills; an unexpected crisis or hardship can sometimes impact our finances. Life events, such as prolonged illness, job loss, and the break-up of a marriage can, and sometimes do, occur in many people’s lives. When this happens, making the monthly mortgage payment often can become difficult—if not impossible.

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You Can Protect Your Home
By knowing where to turn for help and learning about what you can do, it’s often possible to avoid foreclosure and protect that valuable asset you call ‘home’. Here are a few of the most important things you need to know:

If You Need Help, Contact Your Lender Immediately
If you fall behind in making your mortgage payments, contact your lender immediately. The sooner you contact your lender regarding any financial difficulty you may be experiencing, the more options potentially may be available. When you call, you’ll be asked to explain your situation and provide current financial information such as monthly income and expenses. Depending on the specific situation and type of loan you accepted, a lender may be able to offer one or more of the following options, including:

• Temporarily delaying payments (also known as “Forbearance”). This is a formal arrangement that either suspends or reduces monthly payments until the borrower recovers from the financial setback.
• Recovering from missed payments (also known as “Repayment Plan”). This is an agreement between the borrower and lender outlining how to handle missed payments. It involves spreading the delinquent amount over several months or longer (in addition to making the regularly scheduled monthly payments) until the missed payments are repaid and the loan is brought current.
• Restructuring the loan (also known as “Modification”). This is a temporary or permanent change in one or more of the borrower’s loan terms that generally reduces the monthly payment down to a more affordable amount given the borrower’s present financial situation. Methods may include changing the loan’s interest rate, extending the time available to repay, or re-amortizing the loan balance.
• Refinancing the home loan. This option pays off the old loan with a new loan that has different terms more suited to the borrower’s present circumstances, and is designed to establish a lower monthly payment amount than the original loan.
• When staying is not an option. If financial circumstances have dramatically changed and the borrower can no longer afford the home, needs to relocate or just wants a fresh start, there are other potential options available. Early understanding of this will aid in the ability to hopefully sell the home to avoid a foreclosure. If more is owed on the home than it is worth in the market, early contact with the lender will help determine if there is a possibility to accept a reduced payoff amount.

Consult Your Tax Advisor Before Making Any Decisions
You should also consult with your tax advisor prior to making any decisions, to learn the potential tax implications and benefits associated with these options.