Pretty much every American dreams about owning their own home. Unfortunately, not everyone has the money to purchase their dream home outright. This is where mortgages come in. And mortgage debt is, without a doubt, one of the most substantial debts in America.
However, it is not uncommon for a homeowner to experience financial hardships before clearing their mortgage debt. When this happens, they may fall behind on their mortgage payments.
Understanding mortgage default
Basically, mortgage default happens when you fail to make mortgage payments when they become due. A homeowner can default on their mortgage when they are unable to afford the payments or when they no longer want to own the home.
A homeowner can also default on their mortgage payment under the following circumstances:
- If they fail to adequately insure their home
- If they fail to occupy the home as outlined in the mortgage terms
- If they transfer home ownership to another party without notifying the lender
So what happens when you default on your mortgage payments?
Regardless of the reason, defaulting on your mortgage comes with a number of consequences. Here are some of them:
- Foreclosure and eventual eviction – Your mortgage lender can claim back the home through a foreclosure process if you fail to reach an agreement on your mortgage payment.
- Late fee penalties — subject to your mortgage terms, the lender may impose late fee penalties on you
- A damaged credit score – defaulting on your mortgage can negatively hurt your credit score. And this damage can remain on your credit report for a long time making it difficult for you to obtain credit in the future.
Defaulting on your mortgage and the resulting consequences can be a scary prospect. Knowing your legal options can help you protects your rights if you have defaulted on your mortgage payments.