Keeping a roof over your family’s head is an important concern when income drops. If you rank your bills in order of priority, housing is probably near the top of the list. Careful planning and timely action can help you avoid eviction from your rental unit or the loss of your house.
According to Erin Ludwig, ISU Extension Family Resource Management Specialist, the key to any plan is talking with lenders, landlords, insurance agents, and others before you miss a payment.
Tips for Renters
If you rent, tell your landlord about your situation before rent is due. Ask for a temporary postponement until your income resumes. Offer to provide some service, such as painting, in exchange for rent. Suggest making smaller payments for a month or two, with the understanding that you will catch up when your income increases again. Often it “costs” money for a landlord to change tenants, so they may be willing to work with you.
Home Owners
With reduced or lost income, you quickly feel the stress of a sizable mortgage payment. If your loss of income will only be for a few months, you may be able to cut back on other expenses to meet your mortgage payments.
If you miss a mortgage payment, you have defaulted on your contract and your lender can begin foreclosure on your home. If meeting your mortgage payment on time appears impossible, immediately contact your lender before you miss the first payment. You may be able to skip a payment or arrange a lower payment.
Go in person and take along a new spending plan that fits your reduced income. Most lenders would rather avoid the time and cost involved in a foreclosure if another alternative can be worked out.
If your family’s loss of income is going to last a long time or be permanent, you need to consider other options.
· Rent your house to someone else and rent less costly housing for yourself. (Check the effect this will have on taxes, and changes needed on insurance coverage).
· Sell your house and buy or rent less costly housing.
· Move in with relatives or friends. Offer to share some of the housing costs.
· Take in a boarder and use the money toward mortgage payments.
· Deed your house back to the lender. You may not lose much. For example, if you've been paying on a 30-year mortgage for 10 years, you have not paid for much of the house yet – only about 10 percent. If you choose deeding the house back to the lender in lieu of foreclosure, and the house has decreased in value, you are still responsible for the amount of the loan and must pay the lender the difference. If by staying in this house you won’t have enough money for food or other necessities, you may find it less stressful to leave the house and find less expensive housing.
Don’t forget insurance and taxes
Homeowner or renter’s insurance protects you in case of loss or damage to property. During times of reduced income, it’s important to have property insured. If you can’t make an insurance premium payment, call or write your agent or the company. There may be some leeway (10- to 30-day “grace period”) for a late premium payment. Not paying insurance on your mortgaged home is considered defaulting on the mortgage.
Explain your family’s situation and offer a different payment plan. Check the possibility of smaller premiums by:
· Changing to a monthly, quarterly or semi-annual payment plan with the same coverage. There is a service charge for making smaller payments and this is based on the amount of the payment. Check the total yearly amount difference, and select the payment plan that will give you the most savings and still fit into your family’s spending plan.
· Changing the deductible.
· Changing to a more basic coverage.
· Check for possible discounts if all your insurance (house and auto) is with the same company.
If you are unable to pay taxes, contact your local county treasurer or tax collector to learn about procedures used when property taxes are delinquent. Interest accumulates on unpaid taxes, and you will have to pay this interest or it becomes a lien on your property, just like the unpaid taxes. You’ll receive notice of any actions taken as a result of non-payment of taxes. Take these notices seriously. Eventually, unpaid taxes will result in the sale of your property through an auction.
For additional information, contact the Iowa State University Extension office in [County] by calling [telephone]. Erin Ludwig, ISU Extension Family Resource Management Field Specialist, can be reached at 563-382-2949 if you have additional questions.
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