What Happens When You Can't Pay Your Mortgage?

No matter how bad your finances get, keeping a roof over your head is your first priority. As soon as you become concerned about your ability to make mortgage payments, get help. Your lender may be able to refinance or modify your mortgage so that you can continue to make payments. Remember: If you stop paying your mortgage, you'll eventually lose your home to foreclosure.

Your Lender Will Contact You

When you miss a mortgage payment, you'll probably get a phone call or letter from your mortgage company. If you are having financial trouble, this is a good time to be up front with your lender and try and work out a way to keep your home. If you are in serious debt, you may want to talk to a bankruptcy lawyer. Some bankruptcy options can help you deal with your debt while avoiding foreclosure.

You'll Get a Demand Letter

After two or more missed payments, your lender will send you a demand notice. You'll typically have 30 days in which to bring your mortgage current, or the lender will begin foreclosure proceedings. You may still be able to work with your lender to either save your home or avoid foreclosure by agreeing to a short sale, but you need to be proactive. Contact your lender and, if necessary, speak to a housing counselor or attorney to learn about your rights.

Foreclosure Sale

Depending on where you live, your lender may be able to foreclose on your home within only a few months after you default on your mortgage. You'll lose your home and your lender, or the home's new owner, will eventually evict you, though it may take months before the eviction process begins. However, some states offer a redemption period after a foreclosure sale that can let you pay what you owe or get your home back. Some mortgage lenders may even offer you the opportunity to rent your home until a buyer can be found.

Credit Consequences

A foreclosure may be the worst thing that can show up on your credit report. Even though a Chapter 7 bankruptcy can stay on your report for 10 years, as opposed to seven years for foreclosure, foreclosure may cause you more trouble. A foreclosure on your report says that your situation got so bad that you lost your home. Even if the circumstances were out of your control, this can be a big red flag to lenders, employers and landlords.


About the Author

Lainie Petersen writes about business, real estate and personal finance, drawing on 25 years experience in publishing and education. Petersen's work appears in Money Crashers, Selling to the Masses, and in Walmart News Now, a blog for Walmart suppliers. She holds a master's degree in library science from Dominican University.