Mortgage renegotiation options exist. But first do the homework to get ready for it.
Mortgage renegotiation can be an excellent option, depending on the situation.
In spite of the strains on the economy, job market, and other concerns like personal income security, mortgage renegotiation can be the right strategy to solve long-term of issues with meeting mortgage payments. But two important points accompany this advice: doing one’s basic homework upfront is key, as is identifying whether or not your ability to meet your mortgage payments is more of a short-term than long-term issue.
Mortgage renegotiation and short-term problems
If you foresee being able to make the necessary mortgage payments on the horizon of a few to several months from now, call your lender and ask about temporary forebearance or postponement of payment plans as an alternative to mortgage renegotiation. While lenders may initially seem unwilling in the current real estate market to put a property through with this issue, there is little upside to lenders watching a property with which they have issued a mortgage go through the foreclosure process if it can be averted.
Mortgage renegotiation options for the rest
If your ability to cover mortgage payments is forseen to be a long-term problem, then mortgage renegotiation can be the best option. Take the following actions:
- Calculate your DTI – debt-to-income ratio. How much of your pretax income goes towards housing costs? If your demonstrated DTU is above 38%, then lenders have deep incentives, including government programs now, to agree to a mortgage renegotiation and modification.
- Write a letter of hardship to your lender, explaining your DTI and attach photocopies of supporting financial documents to support your argument for mortgage renegotiation. Struggle to sort through the documents? Set aside an hour to sift through them, organizing them into smaller and smaller piles until their manageable. Then review them systematically to identify the needed information in support of mortgage renegotiation. In the letter, emphasize your willingness to fulfill loan repayment and the desire to repay the mortgage.
- Ask about the procedures in mortgage renegotiation to have the actual interest rate changed. This is more complicated because lenders will resist such a surgical change to a mortgage agreement without context, so a letter explaining your situation and desire to repay the loan will help as well.
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