Q: I need $8,000 to bring my mortgage to date. It costs me $1,000 per month. I have $100,000 in equity. It seems crazy to lose my home, but I cannot secure the $8,000 I need to keep from losing my home.
I used to make over $100,000 per year, and now I make significantly less. My lesson to my children was going to be that money doesn’t buy happiness. My previous job was stressful, and I missed my kids, so I made a life change.
But what I’ve found is money does, in fact, buy happiness. What can I do?
A: We’re fond of the saying that “money doesn’t buy happiness, but it sure helps.” We’re sorry you’ve fallen on hard times. Unfortunately, we don’t have any good answers for you.
You can try to see if your friends and family are willing to give or lend you that money to pay the lender so you can keep your home. You can also pivot, try to sell the home and save the equity you have. Or, you can contact the lender to see if a payment plan may be available.
When the Great Recession hit, the government came out with HARP and HAMP programs. The Home Affordable Refinance Program is still available through Dec. 31. The program aims to help homeowners with little or no equity in their homes to refinance to get some breathing room with a new loan. HARP would not work for you, but you can still check out the website (harp.gov) to find out whether the program could help in another area.
On the other side of the coin, the Home Affordable Modification Program (makinghomeaffordable.gov) may be able to help. This website, sponsored by the Department of Housing and Urban Development, offers information on how to benefit from the program. Although one of the options might have you contact your lender to find out whether it participates in HAMP, your lender may have its own program that can help you keep your home. If you are employed and can pay your bills, your lender may be willing to defer some of the amount you owe, have you sign paperwork that can reduce your payments temporarily, or come up with a different plan.
Although it would be good to bring the loan up to current, you should seriously consider selling your home. If you bought it when your income was much higher, then renting a home that suits your new resources is a smarter move. And if you can pocket $100,000 in cash, that will go a long way toward helping you feel more financially secure.
The worst thing would be to allow the bank to foreclose. As the foreclosure process continues, the continued increase in the amount owed to the lender (plus interest and fees) would quickly eat away at your equity; and when the home finally sold, it might wipe out that equity entirely.
We suggest that if you can’t get your lender to assist you in a program that can suit your budget, you should try to sell as quickly as possible and save as much of the equity as you can for yourself and your family.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate lawyer. Contact Ilyce and Sam through her website, ThinkGlink.com.