Mortgage debt got you in trouble? Here are some tips to remember to help you climb out of the hole.
1. Go that extra payment
If you've got some financial flexibility, and want to build equity and pay off that loan early, you can make an extra payment every year. Find out just how that will impact your loan with the Mortgage calculator.
2. Prewarned is prepared
If you have an adjustable rate, research when it's due to reset and what the new payment might be. Call your lender and have a representative do the calculations for you, or do them yourself using Rate Watch and the Mortgage calculator. (Don't forget to add in fixed costs, like PMI.)
3. Fight it if your property tax appraisal went up even as your home value dropped
It's happening in some places as assessments lag behind actual home values. Call your local property tax office and find out how to appeal. To check out what similar homes in your area are fetching, investigate sites like Zillow.com, PropertyShark.com and Trulia.com.
4. Pay more than the minimum
With an option ARM or interest-only loan, you have some flexibility in your monthly payment. But, as with those credit card bills, you don't want to just make minimum payments. It will take you forever to pay off the house, and in some cases, interest is building faster than you're paying it off, which means you're losing money. With home prices dropping, that's also a good way to end up owing more than the home is worth.
5. Research refinancing options if you have an exotic mortgage or think future payments are going to become unmanageable
These days you'll need a good credit rating and some equity in your home, but in the right circumstances it's possible.
6. Weigh the refi decision carefully
The advantage is ditching an exotic or adjustable-rate loan for a fixed-rate mortgage, and/or getting a lower interest rate. Ask the lender: What are the out-of-pocket costs? What if that money could be applied to the current mortgage or put aside for emergencies? What's the new pay-off date? And, especially with a cash-out option, what's the worst-case scenario under the terms of the new loan?
7. Shop if you're getting a refi
Hit a variety of lenders (credit union, bank, builder-affiliate) and brokers to make sure you're getting the best deal. Make all applications within a 14-day period so that those credit inquiries do the least possible damage to your credit.
8. If home values in your neighborhood are falling, and you've already decided to refinance, consider moving up your plans
That way, you should have a larger cushion of equity to facilitate that loan. Calculate your savings with the Refinance calculator. Remember to quiz your current lender on prepayment penalties.
9. Don't take a larger refinancing mortgage just because it's offered
You've got other life plans -- traveling, grad school, kids, retirement -- that your lender doesn't consider. Differentiate between how much you can get and what you actually need.
10. Consider pulling your house from the market if your house is for sale and you're not getting satisfactory offers
Sometimes the options (postponing or canceling a move, renting the home, refinancing), are more palatable than taking a loss.
11. Set your own priorities
Apart from bill collectors and ringing phones, decide what things you and your family need. Then, look at your options for trimming bills and raising income. What you don't want to do: lose a home because the bill collectors are calling and the mortgage company isn't.
12. Lender not playing by the rules? Contact its regulator
That will be either the FDIC or the state. For the FDIC, check its Institution Directory or call: (877) 275-3342. If it's not on that list, check State Mortgage Regulators to find contact information.
13. Maximize that mortgage interest deduction
You can deduct the loan interest on a primary and a secondary residence, which could also be a boat or RV with sleeping quarters, cooking facilities, and a bathroom, from your taxes if you fall below a certain home-debt threshold.
Post your January payment by Dec. 31, and you can also include that in this year's deductions. Use the Mortgage tax deduction calculator to see how much it helps.
14. Don't forget your PMI (private mortgage insurance)
If your policy was issued in 2007 or 2008 and your adjusted gross income is less than $110,000, you can probably deduct those PMI premiums, too.
15. Afraid of losing the home? You might have a few more options than you thought
A number of programs assist homeowners who have gotten behind on payments. Two fairly new ones:
- Project Lifeline covers all borrowers (not just subprime borrowers) who are behind three months or more on payments. If borrowers respond to the lender, it buys them a 30-day grace period to work out an arrangement. Read more about it in the Bankrate story " A lifeline for delinquent mortgage borrowers."
- FHASecure helps subprime borrowers refinance into FHA-backed loans. Call (800) CALL-FHA, or (800) 225-5342.
16. Talk to a mortgage counselor
One good (and often free) resource: a mortgage counselor affiliated with the National Foundation for Credit Counseling. What they can do: Examine your situation and offer some options like renegotiating your mortgage or getting a rate freeze on your loan to help you keep your home. They can also negotiate for you with your lender.
Visit hud.gov or call (800) 569-4287.