Finding a way to get your mortgage payments under control is key to successful retirement planning.
A paid-off mortgage makes retirement more secure for at least two reasons:
- The amount of money required to pay the bills drops significantly when a major monthly expense such as a mortgage goes away. The house can represent a source of money to finance retirement. You can take out a line of credit to even out your cash flow, drawing from it to cover short-term demands rather than selling stock or bonds. A line of credit usually has a lower interest rate than a credit card. If you need a regular source of cash, a reverse mortgage can provide it.
- If you're close to paying off your mortgage, commit as much spare cash as you can toward reducing the principal. Even a few extra dollars a month can make a difference.
If you're one of the many people who were caught in the housing meltdown and your loan is either underwater or so close to it that you haven't been able to refinance at a lower rate, there may be help available.
Earlier this year, five major mortgage lenders under pressure from state attorneys general agreed to provide $17 billion to reduce principal for borrowers who owe more than their homes are worth and are behind on their payments. The amount of principal reduction will average about $20,000 per borrower. Another $3 billion has been earmarked to help borrowers who are underwater but current on their mortgages, so they can refinance at today's low rates.
This deal was reached in January, but the particulars are only now available. Here are the participating lenders and their customer service phone numbers:
- Bank of America: (877) 488-7814.
- Citigroup: (866) 272-4749.
- GMAC: (800) 766-4622.
- JPMorgan Chase: (866) 372-6901.
- Wells Fargo: (800) 288-3212.
This isn't a perfect agreement. If your mortgage is owned by Fannie Mae or Freddie Mac, you probably can't participate. And obviously, it includes only a few mortgage companies, although nine more are expected to join in.
But something is better than nothing, and now's the time to investigate while the agreements are still fresh. If your mortgage is one of the hundreds of thousands held by one of the lenders above, pick up the phone, and see if you can qualify for help. There are no income caps.