If for whatever reason, you can’t pay your mortgage on time or for less than the amount due, this results in defaulting on a mortgage. The consequences can be costly and affect your ability to get a loan in the future, so it’s important to learn about its effects. Continue reading to see just what can happen when you’re in default.
What Happens If I Default on My Loan?
One of the first things that happen when defaulting on a loan is extra costs that include a late fee, which could add hundreds onto your mortgage bill. According to the Federal Trade Commission (FTC), it’s important to understand the costs of default and stress that if you have problems paying your mortgage, you must contact your loan servicing company to discuss your options. The longer you wait, the fewer options become available.
Other consequences of default include:
- Default-related fees — your servicer may charge you for “default-related services,” which, over time, can add thousands of dollars to your loan. These fees can include property inspections to ensure you’re living in the home and maintaining the property. Property preservation services can also include lawn mowing, landscaping, and repairing or boarding up broken windows and doors. There’s also foreclosure costs that may involve attorney fees, property title search fees, and charges for mailing and posting foreclosure notices.
- Credit score damage — your mortgage company has information about your payment history to credit reporting companies, such as if you’ve been late with a payment or have missed any payments. (even one late payment can lower your credit score) This can damage your credit score and prevent you from getting a car or other loans and what your interest rate will be once you can get another loan.
- Foreclosure — in default, your loan officer may start foreclosure proceedings. Once completed, foreclosure becomes a matter of record. It can increase the costs you have to pay to bring your account to good standing. Again, this makes it more challenging to get credit in the future. If you can’t work out a solution, your home could be sold at a foreclosure auction. Depending on which state you live in, you could also be responsible for paying a “deficiency judgment” — the difference between what you owe and the price the home sells for at the auction.
What You Should Do
The crucial thing to prevent defaulting on a mortgage is keeping up on your monthly payments. Ensure your payments are credited on time, and there aren’t any unusual or unexpected fees or charges by obtaining monthly statements. Most mortgage companies put that information online for easy access. It’s essential to fully understand your mortgage terms and ask questions, keeping a good record of that communication. Monitor the following:
- Payment postings
- Improper late fees
- Too many late fees
- Default-related fees
- Escrow account
- Bankruptcy servicing
Contact Bob Buys Houses
Defaulting on a mortgage can be a trying time. If you’re facing foreclosure and need to sell your home quickly, give the experts at Bob Buys Houses a call or visit our contact us page. We can purchase your home, close fast, and have money in-hand soon after to get you out from under debt. Sell your Salt Lake City home to us with no commission or fees.