I know EXACTLY how you feel. In 2009, I lost my job as a teacher when my school lost its funding. I was able to pay my mortgage out of pocket for a couple of years, then the money ran out. Once that happened, I was scared and afraid. For the 1st time ever, I was not able to pay a major bill and was unsure of what to do.
Here's the advice I wish I had then, that I know now:
1) Call your mortgage company...often. Explain your situation and ask for help. Do you qualify for a modification? Can you sell the property? Ask what your options are. Hiding from your lender, or not picking up when they call will only make things worse. Banks just want their money and many are willing to work with you to get at least some of it.
2) DO NOT dip into your retirement fund to pay your mortgage. If you do, you may get current for a little while, but if you still can't afford your mortgage later, you'll fall behind again and you'll also have less money for the future. Fiercely protect your future-self. Remember, when you're 80 years old, the bank won't be there to make sure you're ok because you paid them. It is your younger self's job to take care of your older self. Taking care of her is more important than even your mortgage being paid, because you can still work now, while she won't be able to.
3) Consider getting a roommate or renting out your home and moving someplace much cheaper. If the rent you receive covers the mortgage, it might be worth it to share your home until you get back on financial track.
4) Check your state. New Jersey, where I live is a judiciary state. That means that the bank can't take my home as long as it's occupied, without taking me to court. It's been 6 years and because of The Recession, I STILL have yet to go to court because there are so many other people ahead of me. If your state has the same rule, the bank can't just seize your home and you have time to decide what to do.
5) Consider a short- sale. If you're ok with giving up your home and it's worth less than what you bought it for, this is viable option. A short-sale is when the bank let's you sell your house for less than you bought it for. Ask your lender about this option and check with your accountant about how this option may affect how much you pay in taxes the year you sell.
6) Don't worry! I've been stuck in limbo for 6 years with my house and you'll be fine. Although my credit score took a hit at first, I figured out how to raise it 100+ points in a year even though I still wasn't paying my mortgage. I wrote a post on my blog that shows you how here: http://thebudgetnistablog.com/2013/raise-your-credit-score-100-points/
Hope this helps! Please keep me updated. 🙂
Are you struggling with your mortgage? Please share your story with me in the comments below and I'll do my best to help you. 🙂
Tiffany "The Budgetnista"
(sharer of all things, frugal, fun and fabulous)
Content concerning legal matters is for informational purposes only, and should not be relied upon in making legal decisions or assessing your legal risks. Always consult a licensed attorney in the appropriate jurisdiction before taking any course of action that may affect your legal rights.
*Sidebar: Make sure to share this post with that certain, sister-friend of yours that needs help with managing her mortgage.*