What Happened When I Defaulted on My Mortgage — and How To Avoid It
A mortgage default sounds scary, but what exactly is it?
“To default on your mortgage generally means you cease making your mortgage payments,” said Carole LeVar, director of real estate lending at Addition Financial. “There can be other reasons, but the largest majority of defaults are a direct result of non-payment.”
Unfortunately, once you fail to make payments according to the promissory note you signed when you closed your mortgage loan, your lender can consider you to be in default. If you’re worried about defaulting on your mortgage payments you’re not alone. Seth Jacobs, a mortgage broker and founder of Maine USDA Home Loan, knows this problem firsthand. He shared his own tough time with missing mortgage payments and how he got back on track.
The Hard Truth About Defaulting on a Mortgage
Some years ago, Seth Jacobs couldn’t pay his mortgage when unexpected personal and financial circumstances converged. The risk was big: losing his home and wrecking his family’s stability. His credit score also took a hit.
“The consequences were immediate and undeniable,” Jacobs said. “The once-stable roof over my head was at risk, and the impending foreclosure threatened to upend the sense of security my family and I had worked so hard to establish.”
Jacobs recounted the emotional toll of defaulting, as well. “The fear of losing our home and the embarrassment of facing financial distress were difficult to bear. The impact on our credit score was a hard blow to our financial reputation, affecting our ability to secure credit for other needs.”
However, defaulting on a mortgage wasn’t the end of his story. “t was a challenge that needed a solution,” said Jacobs. “The experience taught me the importance of being proactive and resourceful in seeking resolution.”
Here’s how Jacobs tackled his mortgage default.
He Talked to His Lender
Jacobs’s first step in dealing with his mortgage default was talking openly to his lender. “I reached out to discuss my circumstances openly and honestly,” he said. “This conversation helped establish a line of communication and set the stage for potential solutions.”
He Looked at His Options
Jacobs reviewed all the options available to him. “I diligently researched various options available to homeowners facing foreclosure.” he said. “Loan modification, refinancing or even selling the property were all potential paths to explore. Each option came with its own set of considerations, and it was essential to weigh the pros and cons carefully.”
He Planned for Repayment
Jacobs worked with his lender to make a repayment plan he could manage. “I worked closely with the lender to develop a repayment plan that aligned with my financial capabilities,” he said. “This involved reevaluating my budget, cutting unnecessary expenses and redirecting resources towards meeting the mortgage obligations.”
He Got Expert Advice
Jacobs spoke with financial advisors and legal experts to help him understand his choices better. “I engaged with financial advisors and legal experts who specialized in mortgage issues,” he said. “Their insights helped me navigate the complexities of the situation more effectively.”
He Fixed His Credit and Rebuilt Trust
After sorting out the immediate problem, Jacobs worked on improving his credit score and building trust again with his lender. “Responsible financial behavior and timely payments towards other obligations were crucial steps in this process,” he said.
How You Can Avoid Defaulting on a Mortgage
The way to avoid defaulting on a mortgage is to take action once you realize you’re going to have trouble making your payment. Here are some suggestions, via Rocket Mortgage:
- Think about taking on a side gig or part-time job to earn extra income so you can more easily cover your mortgage payments.
- Consider refinancing your home if it will reduce your interest and lower your payment to give you some financial breathing room.
- Reach out to your lender if you know you won’t be able to make one or more mortgage payments so you can work together to keep you from defaulting.
Take a Head-On Approach When Dealing With a Mortgage Default
“In retrospect,” Jacobs said, “the experience taught me empathy on a whole new level. It deepened my understanding of the challenges clients face when navigating mortgage difficulties. Defaulting on a mortgage is undoubtedly a difficult chapter, but it’s also a lesson in resilience, resourcefulness and the importance of seeking help when needed.”
Defaulting on your mortgage can be scary, but your mortgage servicer would rather hear from you than not.
Thomas O’Connell, SVP, Default Management at Planet Home Lending, said, “Don’t be afraid to contact your mortgage servicer. The default professionals you’ll talk to are knowledgeable, patient, kind people who want to help you. They’ll walk you through your options. And having your servicer explain those options to you in a way that you understand the impact is critical. It’s a big financial decision, so take your time and ask questions until you’re comfortable with your decision.”
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