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3 Simple Actions For Struggling With Mortgage Payments

3 Simple Actions For Struggling With Mortgage Payments

Buying a house is one of biggest steps you take in your life. The reason the step is so large is that it usually involves getting into more debt than you have ever had. Not only that but you are signing papers promising to make monthly payments for the next 30 years. That can be a nerve-wracking realization.

30 years is an incredibly long time, and a lot can happen in that period. Jobs can be lost, spouses can pass away, weather can destroy homes. These are just a few of the unfortunate events that may take place in a person’s life.

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Most of these usually result in financial stress after the initial disaster, and nothing is more stressful than a hefty mortgage payment that eats up more than half of all the money you bring in.

This situation is not uncommon and there is no shame in it. There are many resources and steps that can be made for people stuck in this awful scenario. Here are three actions that can be taken.

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Mortgage modification

Many people have never heard of mortgage modifications and do not even know they are an option. They simply stop paying their mortgages and eventually are forcibly removed from the home. This is not the way to go. Most banks lose a significant amount of money on a foreclosure. This means they are often willing to help work through temporary issues if they feel it will be cheaper for them in the long run. You can contact your mortgage company and they can start helping you revise the terms of your mortgage.

There is a lot of leeway in these modifications. Typically they will do something like extending the life of the loan, which requires lower monthly payments from you. This can be a little more expensive in the long run but is much better than losing a home.

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Home loan balance transfer

This option is a little more well-known but can be more complicated than a mortgage modification. A home loan balance transfer involves shopping around for another bank that can essentially offer you a better deal.

Perhaps in the time since you purchased your home interest rates have gone down. This means that another bank may be willing to pay off your loan, meaning your debt will belong to them. Because the interest rate is lower, you will be getting a better deal and paying less each month. If the interest rate is significantly lower, as it has been for the past few years, this option can save a significant amount of money. You can read more about home loan balance transfers here.

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Forbearance

The last option involves getting the government to help out. This often means a lot of paperwork, but it can also be extremely helpful if you get approved. Forbearance involves getting approved to skip your payments for a certain amount of time. Usually, you need to have a life event that qualifies you for this. A death in the family or a lost job may qualify you for this program.

In conclusion, It is important to seek all avenues when in trouble. Do not ignore the issue until it is too late. Pursue every option, and typically at least one will work out. You will be able to keep your home, and years down the road you will be extremely glad you acted as you did. Remember, there’s no reason to feel ashamed because people get in this situation every day and life happens to everybody at some point. What really matters is how you respond to life’s biggest trials.

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Spencer Mecham

Personal Finance Coach, Digital Marketer

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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