What Should I Do if I Can’t Pay My Mortgage or Rent?

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Mortgage payment overdue
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Have you been laid off or had your hours cut at work? Maybe you’re worried about how you’ll pay your mortgage or rent in the coming months.

The first of the month is the day when many homeowners and renters would have to make their mortgage and rent payments.

But if you can’t make the payment, money expert Clark Howard says to try to keep things in perspective — even though we do understand this is a difficult time for everybody.

“It’s not like if you don’t pay, you’re out on the street,” Clark says. “Don’t stress or panic. When all this is over, and it will be over, you can catch up and rebuild.”

Help Is on the Way

There are actually a lot of recent positive developments that homeowners and renters should take note of.

First, the Department of Housing and Urban Development (HUD) has been ordered to immediately halt “all foreclosures and evictions.”

The temporary moratorium on foreclosures for homeowners and evictions for renters will last for 60 days, according to HUD.gov.

Similarly, the Federal Housing Finance Agency (FHFA) instructed our nation’s largest mortgage clearinghouses — Fannie Mae and Freddie Mac — to suspend all foreclosures and evictions for 60 days, too.

Other state and local governments may be making decisions that impact this as well.

But no matter whether you rent or own, if you know you’ll be struggling to make your next payment, you’ve got to get in touch with your landlord or mortgage company immediately.

Advice for Renters

For renters, that would mean reaching out to your landlord now. Penalties typically kick in under most rental agreements by the fifth or sixth of the month. So you want to open the lines of communication as soon as possible.

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The types of assistance commonly being offered by some landlords to struggling renters include:

  • Rent discounts and extensions
  • Flexible due-date schedules
  • Conversion of security deposits into rent payments

However, even though most apartment complexes are owned by big real estate investment trusts or large investment groups, there’s not really been a coordinated industry response yet.

So, again, the best advice is to get in touch with your landlord or property management company as soon as you can to see what help is available.

Of course, it goes without saying that if you are able to make rent, you should by all means. Clark has put housing at the top of his list of what to pay when money is limited — second only to putting food on the table.

Advice for Those With a Mortgage

When it comes to making your mortgage payment, you’ll typically have a roughly two-week grace period from the first of the month.

“If you are unemployed or don’t have the funds to make a payment, and you get to the 10th of the month and have not been able to make a payment, contact your mortgage lender early and often,” Clark advises.

Stay in touch with them about your inability to make a mortgage payment. They’ll advise you what to do and what kind of options are available to you.

Forbearance may be available. Mortgage forbearance is basically an agreement between a lender and a borrower. The borrower gets to reduce what they pay each month — or even skip paying for a period — with the understanding that the lender won’t foreclose on the mortgage. You will eventually have to make the payments when you are able to again.

Most forbearance options vary by lender, so be sure to ask yours about what help may be available to you. Meanwhile, some states are issuing their own rules about what the lenders can and can’t do during this time.

Struggle to Pay Housing Expenses Expected to Be Short-Lived

Nobody likes to fall delinquent on a debt. That’s particularly true when the place where you hang your hat hangs in the balance. But if there’s any solace to take from all this, it’s that the economic dislocation is likely to be short-lived.

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Once we get through the initial shock and uncertainty surrounding the coronavirus, the economy will recover, Clark says.

“The underlying economy was good going into this,” Clark says. “So when we come out of this, we will have a recovery. Not as fast as this decline is going to be, but we’re going to have a recovery.”

Unfortunately, we will have more short-term economic pain to endure. That includes more layoffs and more people struggling to pay their housing costs.

“This is going to be a very different cycle than what we faced during the financial crisis [when] things got ugly and stayed ugly for years,” Clark says. “This is actually going to be uglier in the short term than things any of us have had experience with [like the Great Recession and the aftermath of 9/11.]”

“In terms of the economic impact, it will be greater — but for a more measured period of time, fortunately — because the underlying strength of the economy was there going into this.”

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