I get many phone calls from families who can’t pay the mortgage. Many times it’s because their mortgage payment is too high, or they have been trying to move but have been unable to sell their house.
Sometimes, things don’t go to plan and a house lags on the market unsold. The real question is what are your options when presented with this problem?
Renting your home when you can’t pay the mortgage is a risky strategy. Getting a tenant to pay you enough rent to cover your mortgage seems like a great idea but it’s more involved than that.
Are you ready to be a landlord?
If you rent the house yourself you are entering the domain of being a landlord. The burden of a proper lease agreement, security deposit, trust account, tenant screening, fair housing liability, risk of default, and eviction processing will fall on your shoulders.
Keep in mind that you will be liable for maintenance and repairs. If you can’t pay the mortgage then you may not have money in reserve to pay for repairs. When buying rental properties I always save a few hundred dollars per month in anticipation of vacancy, repairs, delinquency, and other costs associated with owning rental property. Any landlord can share stores of having to evict tenants from their home for failure to pay rent.
You have to get honest and ask yourself if you want to accept this responsibility.
Call the bank
Call the bank you took the loan from. There are programs designed to help homeowners who can’t pay the mortgage. The main challenge you will run into is that most programs are designed for homeowners who are already behind on their loan. So, if your loan is current but you can’t makes next months payment they may not be able to do anything for you. Calling the bank is a good first step to see what your options are.
Sell the house
Sell by owner
Putting a For Sale By Owner sign in the lawn is one way to approach the problem. I wouldn’t recommend this course of action though. If you are about o miss a mortgage payment you will not have time to wait 2 months to find a buyer, followed by another 2 months for the buyer to close on their loan. This is a lot of time that you don’t have. Also, selling a home by owner can be very stressful! If you’re already under stress then this will only make your emotional condition worse.
Sell with a real estate agent
Another viable option. However, the average days on market in the Triangle Area of North Carolina is 54 days. Remember that it will take roughly the same amount of time for the buyer to close and pay your mortgage off. Can you afford to pay the mortgage for another 4 months?
Sell to an investor
Selling to a reputable investor can be a great option in this type of situation because of speed. There have been times where I was able to make the next months mortgage payment after meeting with them. Another option is the investor can pay all cash for your home and you can be done with the mortgage entirely. A good investor will be able to go over some different options with you.
To simply stop paying the mortgage and not contact the bank is a common strategy that always has negative consequences. Whether or not you move out will have not stop the negative affects on your credit report and the deficiency judgement that will follow.
No matter what you decide to do if you can’t pay the mortgage the important thing is that you take action. The worst thing you can do is nothing! Determine what your options are and then make a decision. Any decision is better than no decision.
Start by calling me. I helped one family that need to move out of state abruptly and wouldn’t be able to afford 2 house payments. I’m happy to spend a few minutes with you on the phone to try and help your situation.