What to do When Your Mortgage is Too Much
Tuesday, July 10, 2018, 6:00 AM | Leave Comment
Life can quickly derail your finances. What you once thought was a sound decision could become a financial burden, and you can get overwhelmed in the seconds it takes to make a choice. A mortgage can become one of these instances.
Mortgages are a long-term commitment, and for the most part very fiscally responsible. However, being such a long-term commitment, you need to determine your life choices accordingly. But, as we all know, life can be unpredictable and can hit you fast. So, how do you recover from when life throws you a curveball and your mortgage suddenly gets too much to bear?
Read below to understand how life can get in the way of your mortgage, and what you can do about it to get your finances back on track.
Life Changes That Can Affect Your Mortgage
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Getting Divorced
Divorces are emotionally and physically draining. To add insult to injury, they can be financially draining as well. If you are under a mortgage when you and your partner split, it can significantly impact your mortgage and finances for the worse. It is enough to go through the process of a divorce, and trying to navigate the financial decisions of diving up the mortgage, quit claiming the deed, and real estate rights among others could be extremely tricky to navigate.
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Becoming A Parent
On the happy side of things, if your marriage is working out great, you may come across the milestone of pregnancy. Becoming a parent, or adopting, is a wonderful life experience. However, if you haven’t figured the cost of a child into your mortgage payments, you may need to recalculate your finances, and you may find out that your mortgage is no longer feasible. According to the US Department of Agriculture, for a middle-income family to raise a child, it costs $233,610 from birth through age 17. This additional cost is profound and may end up throwing a wrench in your mortgage plans.
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Changing/Losing Your Job
Losing your job is yet another way life can blindside you and force you to rethink your mortgage. Imagine, painstakingly combing through your financial details to make sure things are just right to pay a mortgage of 15 or 30 years, only to lose your job five years in. This is a natural hardship to look over, as most people do not plan on losing their job, but it can leave you at a standstill if you aren’t able to recover properly.
Your Options When Your Mortgage is Too Much
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Downsizing
In any of the cases above, downsizing may be your answer. Moving into a smaller home or an apartment means a lower mortgage payment or even none at all if you decide to rent. You’ll want to make sure, however, that you accommodate for anything life can throw at you. If you don’t, then you may end up in the same dilemma, costing you even more.
Take it a step further and spend even less money by adopting minimalism. Life storage captures the essence of how adopting a minimalist lifestyle in your next move can save you money, mainly living by the idea of “just because you have the money doesn’t mean you should spend it on useless souvenirs.” These useless souvenirs include extra rooms and other space that you don’t need, but are paying for by owning a bigger house. Shedding this extra space, if you can, can ease your financial strife if your original mortgage proves to be too expensive.
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Refinancing
Refinancing your mortgage is one surefire way to get your finances on track after a setback. If any of the life challenges above happens to you, a refinance will likely come into the conversation when rethinking your investments.
In simple terms, a refinance allows you to negotiate and take out a new loan while your current mortgage is paid off by a lender. This newly arranged loan generally carries fewer costs for the homeowner.
However, it’s important not to get blinded by the lower monthly costs. It is vital to understand what you are getting into when refinancing your home, as there are many costs to take into account. In some cases, your monthly expenses may be lower, but a higher interest rate can have you paying much more in the long run. But, if done correctly, a refinance could prove to be your saving grace when life sets you back.
Life happens, and when it does, it doesn’t have to ruin you financially. Take the information above to understand how your mortgage can be affected, and what to do when it begins to be too much to handle. An overwhelming mortgage may seem like a significant obstacle to climb, but there are options out there to get you closer to seeing the light at the end of the tunnel.
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