Can’t Afford Your Mortgage or to Refinance? 3 Options to Consider

If you signed a mortgage in recent years and are having trouble keeping up, it’s easy to see why. People who bought homes over the past couple of years most likely paid a premium for their properties and signed mortgages at expensive rates because they had no choice. 

But between that and generally higher living costs, you may be struggling to cover your bills — mortgage payments included. 

In a lower interest rate environment, refinancing can be a good solution when a mortgage becomes tough to keep up with. But that strategy probably won’t work today.

The average 30-year mortgage rate as of this writing is 6.77%, according to Freddie Mac. If you signed your mortgage recently, that’s probably not a much better rate than the one you locked in. It may even be higher, depending on when you put your loan in place. 

You’ll need to consider your options if you’re having difficulty with your mortgage payments. Thankfully, here are three solutions that might work. 

1. Talk to your mortgage lender about loan modification

When you refinance a mortgage, you trade in your current home loan for a brand-new one at a new interest rate. When you modify a mortgage, you keep your existing loan but modify the terms in a manner that’s helpful to you. 

If you’re struggling with your mortgage payments, talk to your lender about it, and see what tweaks to your existing loan it may be willing to make. You shouldn’t expect your lender to lower the interest rate on your mortgage. But it might increase the length of your mortgage so you’re paying it off over a longer period — for example, 40 years instead of 30 years. This lowers your individual monthly payments so you’re able to cover them more easily.

2. See if you qualify for forbearance

Normally, when you stop paying your mortgage, you’re considered delinquent. And that could result in a world of bad consequences, from credit score damage to foreclosure. 

But if you qualify for forbearance, you’re allowed to stop paying your mortgage for a period. And you won’t be considered delinquent by your lender. That’s because forbearance is something your lender agrees to. 

With forbearance, you get a reprieve from making your payments so you can work on improving your financial situation and boosting your savings. And you won’t risk foreclosure with forbearance because, once again, your lender is on board and has given its blessing to not be paid for a while.

To qualify for mortgage forbearance, you generally need to prove that you’re experiencing a temporary hardship that’s making it tough to keep up with your payments. Unfortunately, the fact that costs have gone up in general may not cut it — that’s something everyone is grappling with right now. 

But if you recently lost your job or had your hours or pay reduced, that’s a good reason for a mortgage lender to approve a forbearance request. The same holds true if you have proof of a recent injury or illness that’s kept you out of work and sent your medical bills soaring.

3. Offset your mortgage costs by renting out part of your home

If modifying your mortgage or putting your loan into forbearance isn’t an option, or isn’t what you want to do, there’s a different route you can take — try renting out your home in some shape or form. The rental income you collect is money you can use to cover your mortgage costs. 

If you have an area of your home (like a finished basement) that could serve as someone’s private living space, getting a year-long tenant may be possible. But you don’t necessarily have to rent out space inside your home if there isn’t room or that’s not what you want. 

Let’s say you live in a neighborhood where it’s impossible to park, but there are lots of restaurants and office buildings. You could offer up daily or hourly parking in your driveway for a modest fee if you have a space. Or, you could try to offer up parking on a monthly basis for those who work in the area.

If you have a swimming pool, you can also try renting it out hourly using sites like Swimply. This way, once again, you won’t have a tenant living under your roof.

If you’re having a tough time with your mortgage payments, you’re probably not alone. But all hope isn’t lost. Explore these options for getting relief, and keep an eye on mortgage rates all the while. Those rates are apt to come down eventually. And once they do, refinancing your loan could be your ticket to more affordable payments.

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