The recent blazing hot real estate led to a lot of rush buying. As things cool off, a lot of people are starting to worry about meeting their monthly mortgage obligation.

Dealing with Potential Default On Your Mortgage

The real estate market was a bonfire fueled by historically low interest rates. Well, the rates are rising and the bonfire is starting to look more and more like an old campfire pit that has not been used for years. For many people, the rise in interest rates is proving to be a devastating event if they have an adjustable rate mortgage. As the rates go up, so do the month payment amounts. If payments cannot be met, defaulting on your mortgage is a definite nightmarish possibility.

If you can see meeting your mortgage payment obligations is going to be problematic, the first step is to take a deep breath. There are literally millions of people that face the same problem. You are not a bad person, so leave any feelings of guilt at the door. You do not have time for them. Instead, you need to focus on your options.

The first option is to sell the property. If mortgage default is going to come sooner than later, you need to price the home at the bottom of your local market and get it out of your hands now. To try to save some profit from it, learn how to sell it on a for sale by owner basis. You will avoid paying the six percent commission charged by real estate agents, which should save you some serious money.

For many people, the rise in interest rates has led to the proverbial double whammy. As rates and monthly payments rise, property values are decreasing. This can result in a situation known as being upside down. In practical terms, this means you owe more than the home is worth.

The problem with this situation is you cannot sell the home and pay off the mortgage. Instead of jumping off a cliff, you should call the financial institution that owns your mortgage. It is probably not the lender you obtained the loan from. Lenders tend to sell off mortgages to secondary lenders.

Once you have figured out who owns the mortgage, contact them and be honest about your situation. Ask for a reduced payment or deferral on payments until you can figure out something. Will a lender agree to such an arrangement? Yes. The lender is in the business of providing mortgages, not owning homes. They do not want you to default on the loan for a couple of reasons. First, they will have to try to figure out how to sell it, which puts them in the upside down position you current have. Second, lenders do not want “bad” loans on their books. Bad loans can impact their ability to borrow money and get favorable rates. If they get enough bad loans on the books, the government will step in. No lender in the world wants that to happen.

If you can see that things are going to get bad in relation to meeting your mortgage payment obligations, take a deep breath and calm yourself. Then face up to the problem and take action. Procrastination will kill you.

Dan Lewis is with Great Western Mortgage - professional help for California bad credit mortgage situations.

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