How to Reduce Mortgage Payments Without Bankruptcy

It's a good idea to continually find ways to reduce your expenses, but it's imperative in times of financial distress. Some people seek protection from their creditors by filing for bankruptcy, but they should explore other ways to deal with their woes because of the damage a bankruptcy causes to their credit ratings. If you are facing a mortgage payment that is more than you can currently afford, here are some ways that you can reduce it.

Instructions

1

This first option is for you only if you consider your financial problem to be temporary. Apply for a second mortgage or a home equity line of credit (HELOC), which will provide funds to make your first mortgage payment. If you foresee the problem as being long-term, you will only delay your day of reckoning. A lender's decision will be based on both the equity in your home and your ability to make monthly payments. After your financial problem is solved, you can take out a new first mortgage to cover all that you will owe.

2

Refinance your current mortgage, particularly if current interest rates are less than they were when you bought your house --- this can reduce your mortgage payment significantly. Furthermore, if you have had your mortgage for several years, if you simply refinance for the same amount, this will yield the cash to make your payments.

3

Talk with you mortgage-holder about ways to reduce your monthly payments. During difficult economic times, most lenders would rather that you temporarily reduce your monthly payment rather than foreclosing on the house or your declaring bankruptcy because those alternatives will be very costly. Some of the ways he might suggest are for you to make interest-only payments until you are back on your financial feet. Or he might agree to a reduction of the amount of principal that is owed on the mortgage, which will reduce your monthly payments.

4

Sell your home and begin renting. If you anticipate that your financial woes will last, it would be preferable for you to sell your home and pay off the outstanding mortgage rather than file for bankruptcy or to have your first mortgage lender foreclose on the property. Those solutions will have a long-term effect on your ability to secure credit in the future because either one will appear on your credit reports. Besides, if you have had your mortgage for a number of years, you will receive your equity in the house, depending on its selling price.