How to Save a Home When Drowning in Debt

Taking advantage of mortgage and personal debt programs can be instrumental in maintaining your status as a home owner.

Taking advantage of mortgage and personal debt programs can be instrumental in maintaining your status as a home owner.

Are you drowning in debt and facing the real possibility of losing your home? Know that you are not alone. The plunging housing market paired with high unemployment rates has made it difficult for people to maintain the American dream of home ownership as families across the country are struggling to save their homes from impending default or foreclosure. In fact, it was reported that banks seized more than 1 million homes and reached a record high of 2.87 million foreclosed properties in 2010. If you have found yourself in this situation and are trying to avoid foreclosure at all costs, there are some ways you can regain control of your finances and keep your home by working with your mortgage lender to refinance or modify your existing home mortgage or trim expenses from your budget.

Calculate your monthly household earnings and expenses so they are readily available for when you inquire about homeowner assistance possibilities. Income can be easily calculated by adding up the monthly net wages brought home by yourself and any other bill payment contributors who reside in the home. Monthly expenses can be determined by adding up any recurring bills such as your mortgage payment, household utilities, loan, insurance and credit card payments as well as miscellaneous expenses such as groceries, entertainment, automobile maintenance and gas.Calculate your monthly household earnings by adding up the monthly net wages brought home by yourself and any other bill payment contributors who reside in the home.

Contact your mortgage lender to see if you would benefit from refinancing your mortgage loan or if you would be eligible for such a program. Factors such as your credit score, income, current principal balance and interest rate will determine whether or not you this option is available to you. If you are not able to refinance your mortgage loan, inquire about a possible mortgage loan modification. Making Home Affordable, a federal program implemented in April 2010 to offer some relief for underwater homeowners, offers modifications that are not based on your credit score and can assist in reducing your monthly payment, pending approval, by lowering your interest rate or extending the term of your payments.

Wait to hear back from your mortgage lender regarding the status of your refinance or modification application, as this can often take anywhere from 30 to 90 days to process. During this processing period, you will still be required to maintain your regular monthly mortgage payment so you will want to take a look at your monthly cash flow to see where cuts can be made to your expenses. This may free up some extra money to make paying your bills more attainable and also slim down your expenses just in case your mortgage refinance or modification application is not approved.

Create a budget based on your income and expense information gathered in Step 1 so that you have a clear picture of your monthly financial picture. This data can be entered into a simple Excel worksheet or for those less-computer savvy, this can also be listed in a notebook.

Look over your budget worksheet to determine which bills or expenses can be reduced or removed. Typically, the first items to go would be non-necessities such as cable, cell phones and entertainment. During this process, you may be surprised to see how much money has been spent on excessively dining out or shopping. If this is the case, you may consider packing a lunch at work or eating out less often for dinner or steering clear of those oh-so-tempting sales ads and catalogs.

Check your credit card and personal loan statements to determine the interest rates and balances you are paying. If your rate is above 10 percent, it would be in your best interest to shop around for a lower rate or debt consolidation loan. Many credit card companies also offer promotional rates as low as 0 percent for a specified time -- anywhere from six to 18 months. If you are unable to find a better offer elsewhere, contact your credit card company or lender to ask for a rate reduction. There is no guarantee that this will granted, but it certainly never hurts to ask. If you have been making your payments on time the credit card company may be willing to work with you to make your payment more affordable.

A last and final option is taking on a housemate to split the monthly housing and utility expenses. While you may not particularly want to share your home with a stranger, it may not seem like such a bad idea when weighed against the prospect of losing your home. If you decide to go this route, network to find a roommate that you already know or if this is not a viable option, post a free Roommate Wanted ad on sites such as or Keep in mind that having a roommate is a temporary situation and once you are back on your feet you can resume living tenant-free again.


About the Author

Based in Virginia, Amanda Banach has been a writer since 2009. Her professional work experience includes roles in media advertising, financial services and human resources. She holds a Bachelor of Arts in human resources management and is PHR-certified.

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