FML
Long story short, I’ve just had a devastating blow to my financial situation. There will not be enough money to pay all of my bills including the mortgage.
If I have to choose which bills don’t get paid, what’s the better choice? Credit cards or mortgage? If I get behind on the mortgage, we all know what happens. But if I get behind on the credit cards, I’ll incur about $300 in late fees.
Any advice?
Credit cards are unsecured - the worst that can happen is you’ll mess up your credit rating (especially if you don’t pay the late fees…).
If you miss enough mortgage payments, they’ll take your house.
I agree, loosing your home is very bad. While it does usually take over one year for the lien holder to foreclose & evict you. The process is very hard on most folks both emotionally & financially. It also really kills your credit rating as well.
Disclaimer: I am not a finacial planner, nor do I play one in any way, not on TV or raio. I have no contract with you or yours either. You are getting my advice free of charge & that may be more than it is worth.
Make a written plan for repaying your creditors before you make any calls to either the lien holder or the Credit Card (CC) companies. More on this later. This will help quite a bit as they want some assurance that they will get their money. You should also know what your credit rating is & what it means.
If this is a temporary setback, a month or two, try calling the CC companies. Ask if they can reduce or eliminate your payment for one month. Given advanced notice they will usually work with you. So will many mortgage holders. My lien holder as well as my CC let me skip one payment when I needed to. They also let me change the due date on my lien to later in the month. I do have a very good credit rating & this was taken into account when I asked for some help with these bills.
Often, they will let you make a payment that only covers the interest. while this is not as much help as being allowed to miss one payment, it may be enough to allow you to make all of your creditors a little bit happy.
If it is more permanent, three months or more, you will want to look at adjusting your budget, as well as some kind of refinancing. Some new income source would also help. When you call the creditors, ask them to lower your interest rate. They often can & will. Be sure to wait at least one year between each time you ask them to lower your rate.
All of the above I have used in the past.
IHTH, 48.
How long is this expected to last?
A month? Six months? A year? The answer affects the answer.
If you have equity in the house, you can take out a HELOC to pay your bills while you get things in order again. If it is a couple of months, you could take out an (expensive) advance on one card to pay all the others while this blows over. If you can’t save the house, you could do a short sale and keep paying your credit cards.
You have given so few details, it’s hard to give you all your options.
Duration of the dry spell is absolutely critical.
If you are going to end up losing the house anyway, run up the credit cards to get the house ready to sell. Sell house, use proceeds to pay cc and move. It keeps your credit rating (if timing works out) - which will be useful when you move.
Yes:
To where?
Any income of any sort?
Get a realistic income figure and work backwards - you will need that income to cover everything.
A cheap RV (does Wal-Mart still allow overnights in their parking lots)?
As others said mortgage comes first UNLESS you are so screwed that losing the house and going bankrupt is a foregone conclusion, then it’s all about hanging on to whatever cash you can while you make exit strategies.
One point of difference I will note re 48 Willys advice to work with credit card companies upfront is that in watching a friend of mine go under and lose her house the credit card companies (at least in her case and she had decent credit) are not all that willing to work with you on the front end of a financial crisis, it’s only after you are 3-6 month in arrears they will start talking about taking a reduced amount to clear the account.
Experiences may vary but that’s what she saw.
Sorry I didn’t give enough details.
I hope to be gainfully employed within the next 2 months. I’ve had 4 good first interviews in the last 30 days and am keeping my fingers crossed that at least one comes through with an offer.
Bankruptcy isn’t a foregone conclusion…yet. I’ve been able to pay minimum payments on the credit cards for a while so I"m current on everything but we’re living paycheck to paycheck and now one of those paychecks is gone.
Credit score is 650 and frankly I don’t even know what that means. Well, actually I do know what that means…It means that I need to start making a real budget and start acting like a grownup. Who knew you could be a 55 year old (unemployed) professional and still eff up being an adult.
I called the mortgage company to ask for a deferment and was told that I needed to provide a laundry list of documentation and once submitted, it will take 30 days for them to decide. This means by the time they’ve made a decision, I’m already in arrears.
I will make the mortgage a priority. The credit card late fees were freaking me out but I don’t want to lose the house.
Thank you all for your replies. Wish me luck on finding a job. I can use all the fingers crossed that I can get.
It’s pretty annoying. When I called my bank to say I didn’t have the payment they cheerily told me - but you’re up to date! That people don’t call until they’re at least three months in arrears :dubious:
Fingers crossed for you.
Delay (if you must) paying the cards with the highest interest rates and lowest credit limits. Assuming the cards you pay on time let you keep them it’s a lot better to have lower interest and higher limit cards still on tap than the reverse.
Have you been overpaying your mortgage? If so, you should be able to take a payment holiday without issue.
And paying only the minimum on your credit cards is a recipe for disaster.
Hmmm… you’re 55 - how much equity do you have in the house? Could you take out a short-term bank loan against that equity? Also, can you temporarily switch to paying only the interest on the mortgage?
At some age/equity combination, a reverse mortgage may make sense - an investor pays you a monthly amount and gets the property upon your death.
As for “pre-paying” the mortgage:
My parents believed this one, my siblings are split.
I cannot understand how this is difficult.
If you send a financial institution money, it starts looking for places to apply it.
Oh, there’s a mortgage payment due! We’ll take that out of this check she sent. Oh, still money left? Let’s see what she owes - the monthly mortgage payment is paid, what else does she owe? Ah - the principle on the mortgage!
That is what they do with an over-payment - they do not typically have a suspense file in which the money will sit until another payment is due.
Unless you have, in writing, a note from the lender saying they recognize the overpayment as a pre-pay against future monthly payments, THEY DON’T WORK THAT WAY!
Look at the statement - what did they post the overpay as?
A HELC (Home Equity Line of Credit) is a wonderful thing - that nobody thinks of arranging until they need one - by which time they may or may not qualify for one. If the lender uses an income-based calculation, it may be too late.
THE BIG PROBLEM with HELC is that it is secured money - don’t re-pay it and you’re one step closer to foreclosure.
A hard-money second is the same thing, and available if a HELC isn’t - they are expensive, and they makers typically have no problem foreclosing.