What are the consequences of defaulting on your mortgage?

Question

I am in the process of selling my house, but want to be out of it by December 2006 at the very latest.

Answer 1

Under no circumstances should you default on your mortgage. As well as the bank taking the steps outlined by the previous answerer, you will end up not being able to close on your house. Not being able to get credit for another mortgage for 10 years. It will drag down your credit rating so badly, that you will be lucky to get any credit from anywhere. And your other creditors may begin demanding the whole of the money owing to them instead of waiting for you to default on payments to them as well. If you have to beg for a loan from your family and friends to cover the mortgage payments until your house is sold, then this is what you should do.

If you absolutely do not have any other way to get the money, then going to the bank that holds the mortgage and explaining your dilemma completely and honestly is a lot better than just letting them find out when you default. They may just step in and take over the selling process so they get all their money owing no matter what. But they will not cheat you out of your ecquity (if you have any).

Doing anything honestly is a lot better than doing anything dishonestly.

Answer 2

I don't know if this is fedral or has state implications, but this is my story in Michigan. If you default they can start forclosure. Getting it out of forclosure is way more expensive than keeping up with the payment. In my case, the lender refused any payment unless I paid all the amount owed including legal fees and late fees. Before I ever went into forclosure, I tried to make payment arrangements. I am talking one late payment here in the history of our loan! Talking to Washington Mutal mortgage company didn't help me. The fees started immediately, kept on coming, and they wanted it all or nothing. Your comany may work with you though. It takes often times over a year of collective non payment including the forclosure period for you to lose your home. If during the forclosure process you appear to have vacated the home the bank can take possession of the home in 30 days. Otherwise, after forcosure has actually happened, you have 6 months to try to somehow pay all the fees and get our home back, say you win the lottery or sell your house with in six months after forclosure (not when the threatening letters from the lender first start). You will be served a notice of forclosure in the local news paper which caused big shame with my husband's family. Your lender may be willing to work out a short sale (take a buy out for the home for less than it is owed so you can sell it for cheep quickly). I vacated my home instead of living payment free for 6 months because I moved out of town and stayed with family for a few weeks until I could rent something. I then went bankrupt which is just as big of a credit stain as a forclosure or a defaulted credit loan that you can pay your way out of. I am telling you there is life afterwards if this happens to you. Rentals can be nice, and can allow you to save money. With good credit afterwards, saved money and steady employment you can purchase a home again. I did in 10 months (which is not typical) but it usually takes a few years (2 or 3). I caution you though; Pay your house first. If you have a home and food and family and even a crappy car with limitted liablity insurance, you don't need credit. Cash is still better. If you sell then you pay off your loan, and take a credit stain. It isn't the end of the world.

Answer 3

The worst that can happen is that the bank will begin foreclosure proceedings once you are behind on 2 months' rent. This gets expensive quickly, even if there is no foreclosure sale because they bring in an attorney and charge you for the attorney fees, which is usually permitted in the loan agreement. At the minimum it will result in a bad credit report, showing you are late with your payments. Remember, you get a tax deduction for the interest portion of your payments, so if you don't make payments your tax deduction is reduced.

Answer 4

I wouldn't default on any payment. Defaulting on your mortage begins a slipery slope and pretty soon you'll find your house on Foreclosure.com ready to get snagged up by a savvy investor.

Answer 5

The MOST important thing you pay is your mortgage even if you can't pay anything else.