4 Proven Strategies to Keep Your Mortgage during an Economic Crisis

If you are able to keep your mortgage in an economic crisis, you will be more likely to recover quickly once the crisis is over. Those who enter default or foreclosure will find themselves with few options since there is such a high rate of foreclosure in most recessions. Saving your mortgage will separate you from those borrowers who could not, and you will be prepared for a more stable financial future.

#1 Have an Emergency Fund

The number one tool to use in a crisis is your personal emergency fund. Most people have heard recommendations that they should save 10 percent of each paycheck, have three months' salary put away or start saving for a potential layoff. Even though this advice is everywhere during a crisis, few people actually heed the warnings. If you think there is a chance you may suffer a reduced salary, you need to be prepared for that. In a crisis, this may mean saving up to six months' salary instead of just three. The chance you will be unemployed for a long period of time is much higher.

#2 Contact Lenders in Event of Emergency

If you suffer any emergency during an economic crisis, it is best to tell your lenders immediately. Lenders are not immune to the crisis, and they are feeling the pressure of their own creditors. Many borrowers are defaulting; you are not alone in struggling to meet payments. These other borrowers may be ignoring attempts to collect or phone calls from the lender. If you behave in the same way, the lender will assume you additionally have no intention of paying. However, you can allay this fear and be proactive. If you keep your lender informed of your situation, you are more likely to find options and assistance without going to a third party.

#3 Use Deferment Options

It is best to continue making your loan payments through an emergency fund if you do lose your job. However, there is a limit to how many payments you can make if there is no salary coming in. Once you fear you may miss a payment in the future, immediately ask your lender for deferment options. You have already told your lender you lost your job, and you have kept the lender informed of the fact that you have not found employment. Now, your lender should not be surprised you need a little extra help. Deferment can allow you to forgo payments for a short period of time while you recover.

#4 Seek Federal Assistance

The government often offers a helping hand if the country is in crisis. You may think you will not qualify, but it is always worth considering federal assistance options since they tend to be subsidized, making them more affordable than private options. For example, in the mortgage crisis of 2007, the Federal Housing Administration offered to refinance variable-rate loans to fixed-rate loans for a number of borrowers. This can help borrowers avoid foreclosure in the short run and get better loan terms in the long run.