4 Tips to Avoid Mortgage Loan Delinquency

Mortgage loan delinquency will result in finance charges, credit problems and even threats of default. No homeowner intends to be delinquent on a mortgage. Delinquency is typically the result of poor planning or financial crisis. Once a loan has gone delinquent, though, it can be hard to restore the mortgage and your credit score. It is better to head off delinquency before it occurs than to try to recover from delinquency afterward.

#1 Use Automatic Payment Methods

One potential cause of delinquency is poor planning. You may have the money to pay your mortgage but simply forget to do so. There is no worse financial mistake; while a court will be sympathetic to a person who has come into financial difficulties, those who mismanage their money will have fewer options to resolve the situation. You can avoid this occurrence by taking advantage of automatic payment options from your lender or bank. By setting up a system that sends your check or deducts your mortgage from an account every month, you will never have to worry about simply forgetting to pay. 

#2 Respond to Notices

If you do forget to pay or miss a bill, ignoring an attempt to collect is not a good plan. You should pay the debt within 30 days of its due date. This will typically allow you to continue payments without a penalty. Most missed payments do not even hit your credit score until 30 days out. This provides you with a generous grace period to correct the error. This grace period is particularly important if you were unable to make your payment due to overspending. You can immediately correct for the problem by monitoring your finances better in the coming month to cover your missed mortgage and new payment. Ignoring an attempt to collect will lead your lender to believe that you have no intention of paying, which can bring a lawsuit much quicker.

#3 Seek Deferral

You may lose your job, get injured, become ill or suffer a financial catastrophe. If you know you will be unable to afford your mortgage in the coming month, do not allow this situation to occur without first attempting to defer the payment. Mortgage lenders will typically be wiling to hear your deferral request if you have a record of successful payments. Write a letter explaining your emergency, point out your history of making payments on time, and ask for a suspension of payments in the immediate future as you recover.

#4 Refinance

The change in your financial situation may be permanent or semi-permanent. If a single deferral period will not be enough for you to keep the loan alive at its current terms, it may be time for you to refinance those terms. Refinancing is not a good idea if you simply want a lower payment; it can be costly, and your credit may drop. However, these penalties are much less severe than those you would face from a mortgage in delinquency or default. You can ask your lender to refinance directly or even seek a loan from a new lending source.