How To Determine When To Stop Giving Money To Your Mortgage Company

It seems like once a day people ask us whether they should keep paying their mortgage. Our clients can't decide if it's worth it to continue paying the lender, when they know it's just a matter of months until they will begin missing payments.

As times get tough the first thing you need to do is prioritize spending. It's very hard to continue paying for a loan on a home that you have a chance of losing. My personal line of reasoning is to never advise someone to pay or not pay their house payment. Instead I try to inform the clients of the possible things that can happen from making or not making a house payment.

In general, when you are trying to get a loan modification with a mortgage company, it's better to be behind on loan payments. But it's not an absolute requirement. In most cases, banks don't want to give homeowners a better deal when they know making the existing loan payment is possible. But if you can prove the existing payment is too much and that a lower payment would be affordable, you can get a modification approved. In fact, some government bailout plans require you to be current on your mortgage. Still, other government plans require you to be behind on payments, so you really need to research what government plans you are likely to qualify for.

When you are capable of keeping your mortgage payment current, while maintaining your basic family necessities, then it's usually a good idea continue making your payments. By paying your mortgage on time, you will avoid damage to your credit report and you don't have to worry about foreclosure or other penalties and fees. If you don't make your payments, your credit report score will decline rapidly. But you will be able to keep your cash, which you will need to help avoid foreclosure. Another downside of not making your payment is all the fees that will be charged when you become late. This may not end up being a big deal if you are able to eliminate the arrears or get a short sale, but if you end up being required to pay the total amount owed to keep your home, these fees can really add up.

In the end, it's up to you to decide if making your home payments is even possible. But if I were up against foreclosure and I could afford my payments, (even if I had to make sacrifices elsewhere) I would continue making them. However, I would not use my savings or retirement account to continue paying an un-affordable mortgage.

I hope this information is helpful and as always, feel free to ask for help anytime!

Nick publishes daily articles on the ForeclosureFish website, which aims to educate homeowners on how they can stop foreclosure while they still have time and options available. Visit the site today to read more about saving a home and recovering from a financial crisis, and download an e-book explaining the basics of how foreclosure works: www.foreclosurefish.net

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