Are you a homeowner experiencing financial hardship?
Should I Stop Making My Mortgage Payments? It’s a question we hear every day. You’re behind on your home mortgage and have decided to pursue a short sale. Do you need to keep paying your mortgage? While it sounds tempting, if you stop making your mortgage payments and other home-related bills it can have consequences. Some outstanding payments may be covered by the buyer or by your lender at closing. But other late payments may delay your short sale, or even make the sale fall through.
Here is some information to help you make the right decision for your situation.
Consequences of Stopping Your Mortgage Payments
Some people simply don’t have enough resources to meet their monthly living expenses and are forced into a mortgage default. Others who are low on cash have access to credit or retirement savings that can be used for mortgage payments.
If your tight financial situation is only temporary, for example if you’re out of work for a short time due to a medical condition, then you may want to consider using credit or savings to tide you over. If your financial hardship is long-term, such as a layoff or divorce, running up credit card debt and whittling away your savings just makes matters worse.
Ideally, you never want to stop making your mortgage payments. A mortgage default has a significant negative impact on your credit, often dropping your credit score by as much as 200 to 300 points. But if it looks like you won’t be able to afford your mortgage payments, the best thing to do is to contact your lender and explain your situation as early as possible. Many lenders will try to work with you to come up with a solution – such as a loan modification or short sale – especially if you have a financial hardship (loss of job, death, divorce, medical emergency, relocation).
Some lenders, however, won’t even consider a short sale if a homeowner is current on their mortgage. As a result, some homeowners choose to do what is known as a strategic default, which is when a homeowner deliberately defaults on their mortgage payments. Since lenders do not want to repossess homes, a strategic default may compel a lender to consider a short sale rather than go through the prolonged and expensive foreclosure process.
Consequences of Stopping Your Homeowner’s Association (HOA) Fees
If you live in a property managed by a Homeowners Association (or Condominium Owners Association), it’s important to stay current on your fees. If you get behind on your fees, the HOA will automatically put a lien on your property. The lien prevents the property from being sold until you have either paid the overdue fees or come to a settlement with them – all of which delay the short sale process.
Here is additional information that may be of help to you:
- 5 Steps To Take If You’re Behind on Your Mortgage
- What is the Short Sale Process?
- Short Sale Sellers Could Qualify to Buy New Home in One Year
- Homeowners, Beware Home Loan Modifications
It is critical that homeowners considering a short sale meet with a professional to review their options and discuss the potential legal and tax implications.
Washington Property Solutions offers FREE real estate attorney consultations as part of our service.
Call us at 425-381-2233 to schedule a free confidential consultation.