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

All the time clients ask us whether they should keep paying their mortgage. People can't decide if it's worth it to continue paying the mortgage company, when they know it's just a matter of weeks until they will begin missing payments.

As times get tough it's important to prioritize spending. It's very hard to continue making payments on a home that you know you're going to lose. My personal policy is to never counsel someone to pay or not pay their mortgage. Instead I try to inform the clients of the different outcomes of making or not making a loan payment.

In most cases, when you are trying to get a loan modification with a mortgage company, it's better to be behind on mortgage payments. But it's not an absolute requirement. In general, lenders don't want to give borrowers a better deal when they know making the existing mortgage 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 new loan mod 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 determine what bailout plans you are likely to qualify for.

When you are capable of keeping your monthly payment current, while maintaining your basic family necessities, then it's usually a good idea continue making your payments. By not missing payments, 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 fall very quickly. But you will be able to hang on to your paychecks, which you will need to help fight foreclosure. Another downside of not making your payment is all the fees that will be charged when you get behind. 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.

Ultimately, it's up to you to decide if making your mortgage payments is even possible. But if I were facing foreclosure and I could afford my payments, (even if I had to make sacrifices elsewhere) I would try to keep making them. However, I would not deplete 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!