Working With Your Lender
To help avoid foreclosure, consider working with your lender as soon as possible (in other words, before it's too late). It is important that your lender is aware that you are unable to work because of your disability and have filed for Social Security disability benefits. The lender will be interested in knowing that if you are awarded benefits, you may not only be entitled to a future monthly benefit, but also a lump-sum, retroactive payment.
Tip: If you purchased monthly mortgage insurance, most plans will cover your mortgage payment for three to six months if you are unable to pay due to disability.
Dealing with lenders, however, can be difficult, particularly when you are coping with the pain, fatigue and emotional strain of your disability. Remember that today's lenders are not interested in being stuck with another foreclosed house. This gives you some leverage and room to negotiate.
In terms of financing options, the following may be available to you as a solution to your immediate need to prevent missed mortgage payments:
- Obtaining a forbearance until after you begin receiving disability benefits
- Refinancing at a lower interest rate so that you can continue to make your monthly mortgage payments
- Making interest-only payments until your disability claim has been concluded
- Obtaining a home equity line of credit to pay your mortgage until your disability claim has been concluded
- Applying for a balloon mortgage to lower your mortgage payments for a fixed period of time
- Effectively using your home's equity through a reverse mortgage
There are several pros and cons to each of the above options that should be considered before you take the next step regarding your home mortgage. If these options are unavailable to you, there still may be a way for you to lessen the impact of defaulting on your mortgage through a forced sale of your home.