Behind on mortgage payments? 8 ways to get back on track

With rising costs, job uncertainty, and higher interest rates, more homeowners are finding it harder to stay current on all their bills. In fact, Federal data shows that almost 2% of all borrowers are at least 30 days late on their mortgage payments. If you fall behind on your mortgage payment, it can feel overwhelming, and many people shy away from answering the phone or opening their mail to avoid the problem. 

While this can shield you in the moment, it can cost you more money in the long run and put your home in jeopardy. Missing a payment not only costs late fees, but can also hurt your credit and make it harder to dig out of this difficult financial situation. If you're behind on mortgage payments, here's what can happen to your home and eight ways to get your loan current.

What happens when you fall behind on mortgage payments?

Missing a payment sets off a series of events that grow more serious the longer it goes unpaid. Exact timelines depend on your loan and where you live, but here's a general idea of what to expect:

After 120 days, your mortgage servicer may begin the foreclosure process under CFPB guidelines. If you are within this timeframe and submit a full application for assistance, your servicer cannot begin foreclosure while it evaluates your application. These late notices stay on your credit for up to seven years, so even when you bring your mortgage current, your credit and ability to borrow are impacted for many years.

8 ways to catch up when you're behind on mortgage payments

Each option for catching up on your mortgage payments depends on how far behind you are and how long you expect to be behind. Read through these eight options to know what to ask your mortgage servicer when you contact them.

1. Contact your mortgage servicer and a housing counselor

Once you realize you can't pay your mortgage, call your mortgage servicer right away. Have information on why you are behind, whether you are behind temporarily or permanently, and how much you earn and spend each month. Your mortgage servicer will likely ask you to complete an application for mortgage assistance.

A HUD-approved housing counselor can review your options. Housing counselors can work with you and your mortgage servicer for free or at a low cost. Never work with a company that asks you for money upfront to help stop a foreclosure.

2. Set up a repayment plan

A repayment plan lets you pay the amount you are behind over time. Your servicer will add a portion of the amount you are behind to your normal mortgage payment each month until you are caught up. This is a great option if you are only temporarily behind on your mortgage.

3. Request forbearance

Forbearance is another option if you are behind temporarily. Your mortgage payments will be reduced or put on hold while you are going through your hardship. Once your situation improves, you will be responsible for paying back the amount you did not pay. This may be added to your mortgage payments or paid in a lump sum.

4. Ask about a loan modification

If you are permanently behind on your mortgage, you can apply for a loan modification. Loan modifications lower your monthly mortgage payment by changing your loan terms. This could include a lower interest rate or extending repayment for a longer term. If Fannie Mae or Freddie Mac owns your loan, you can apply for the Flex Modification, which can reduce your payment by up to 20%.

5. Tap your home equity

If you’re only a couple of mortgage payments behind, you may be able to use your home equity to pay what you owe and potentially cover payments for the next few months. 

• HEI Bridge: If you’ve fallen behind on your mortgage, HEI Bridge can help you catch up on up to two past-due payments and cover at least two upcoming payments, giving you some breathing room to get back on track. With no monthly payments or income requirements, it may be an option even if traditional lenders have turned you down. You can settle when you sell, refinance, or buy out the investment anytime during a flexible 30-year term. 
• Home equity investment (HEI). A home equity investment can give you a lump sum payout to address your financial needs. While there are no required monthly payments, you'll share a portion of your home's future appreciation when you’re ready to settle the investment. There are no income requirements, and you don't need perfect credit to get approved. You can choose to pay off your home equity investment at any time within the flexible 30-year term.
• Home equity loan or HELOC. Home equity loans and lines of credit can give you access to either a lump sum or a revolving line of credit. Both options require good credit and proof of income. A home equity loan requires fixed monthly payments, while a HELOC lets you make interest-only payments during the draw period. 

6. Refinance your mortgage

If you can resume making payments, you may be able to refinance your mortgage. If you can get a lower interest rate or lengthen your loan term, you can reduce your monthly payment. However, it may be difficult to get approved for a refinance once you have fallen behind on your mortgage. Refinances also come with closing costs ranging from 2% to 6% of your loan.

7. Cut costs and look for assistance

Look at your budget to see where you can cut expenses. Lowering your homeowners insurance premium, cutting subscriptions, eating out less, or starting a side hustle can free up extra cash each month. You can also look into homeowner assistance programs that can help you with property taxes and other bills. Some offer low-interest loans while others are grants that don't have to be repaid.

8. Sell your home

If your mortgage has become unaffordable and you don't have a realistic plan to stay current, it may be in your best interest to sell your home. Hiring a realtor and setting an attractive price based on market conditions can help you sell your home for a fair value as quickly as possible. If you owe more than your home is worth, talk to your lender about a short sale or deed in lieu. Both options harm your credit and may create a tax liability, but they do less damage than foreclosure.