If you’re behind on mortgage payments, things are likely feeling stressful.
Opening your mortgage statement at the end each month can feel scary and completely overwhelming because the number is rapidly going up. You might see additional costs such as “late fees,” “foreclosure fees,” or “outstanding balances” added to your total amount due.
At some point, catching up on payments starts to feel impossible.
If you’re feeling like you can’t fully make up the payments you missed, you may be considering sending in a partial payment to the bank.
A partial payment is an amount of money that is LESS than the full amount you owe.
For example, if you’re three months behind – you may be able to send the bank two month’s worth of payments (which sounds like a good idea) but in reality – banks still view this as a “partial payment” because you cannot pay the full three months you owe.
You may be feeling like making a partial payment will let the bank know that:
- You’re a good person and you’re doing your best to get caught up
- You’re trying your hardest to pay what’s owed
- You believe that you will eventually be able to get caught up
Unfortunately, banks are just creditors who want their money in full and they don’t really care how hard you’re trying.
Partial payments do not solve the problem of you being in default. They do not encourage the lender to “back off” of pursuing foreclosure activity against you.
The 4 most important things to know about partial payments
- Don’t send partial payments to the bank, even if it feels like the “right thing to do.”
- If you send any payment to your bank that is LESS than what you owe in full, you run the risk that they will cash your payment but still be able to foreclose on you.
- While your partial payment may get applied to your outstanding balance, it will NOT stop the bank’s ability to foreclose on you. You are still in default and potentially facing foreclosure.
- Instead of sending a partial payment, your goal should be to resolve the default.
- This would be a good time to look at loss mitigation options like a short sale, loan modification, repayment plan, deed in lieu etc. depending on your long-term goals with the home.
- A good starting place would be to have a Mortgage Relief Analysis so you know what your options are.
- Don’t trust the bank representatives when they tell you to just “send in what you can.”
- Sometimes, bank representatives will verbally tell you to “send in whatever you can.” Unless you receive this information in writing, do not rely on it.
- Without a formal agreement in writing allowing you to repay them (like a loan modification or a repayment agreement), don’t trust a bank representative who gives you verbal approval to send in partial payments.
- Have a conversation with an attorney about your situation as soon as possible.
- It can be hard to want to speak with an attorney about being in default. It can feel embarrassing to have to talk about stressful financial issues. While understandable, don’t let this deter you from having a consultation about your options.
- There are ways to get out of default and save the home – making partial payments isn’t one of them and can actually make things harder.
- Save as much money as you can instead of sending in partial payments.
- You will want to put away as much money as you can each month instead of sending in partial payments. Saving your money can help your negotiating position when you apply for a modification or repayment plan because you may end up with a small lump sum to offer the lender in conjunction with your modification request.
- Having this money available can help encourage the lender to write you a new agreement in order for you to just resume making payments.
If you are considering making partial payments to save your home, you likely need to have a larger conversation about your default and the options out there to help you save your home. If you’re in Washington state and would like to chat with me about your options, feel free to call me at (425) 654-1674.