Saving your Home when you can't pay your Mortgage

The general rule is that you should keep up payments on your home loan and related debts, such as real estate taxes, condo fees and home insurance, if at all possible. If you don't keep up payments on your home, your lender can foreclose on your home. This means the lender can sell your home and you will have to move.

Home foreclosure
If your lender forecloses on your home, you will probably lose any equity you have in your house. This is because foreclosure sales rarely are for full market value.

It is sometimes difficult to stop a foreclosure once you have fallen behind. Even filing for bankruptcy may not help you permanently prevent a foreclosure. This makes it critical to prioritize your bills and pay your home mortgage payments first.

Real estate taxes and property insurance are also high priorities if they are not paid with the mortgage, because failure to pay these obligations can result in defaults on your mortgage and loss of your home. Additionally, you can lose your home to fire or other catastrophe if your insurance is canceled.

If you own a condo, condo association fees need to be paid as well, although they will usually be a slightly lower priority than the mortgage. In most states condo associations can enforce a lien against your property for condo fees by foreclosure or another similar process.

If you own a mobile home, and you rent your lot, you will need to treat your lot rent as a priority. Failure to pay lot rent can result in eviction. In some states seizure of the home can also result. If you are evicted, even if you do not lose the mobile home, you are likely to have difficulties finding a new lot.

When you shouldn't make home payments
There are two important exceptions to the rule of always paying a mortgage and related debts first. Sometimes a fraudulent home improvement contractor, shady finance company or other questionable company will obtain a second mortgage or lien on your home. In that case, you may have legal reasons why you do not have to repay the loan--e.g., the aluminum siding was never installed or the replacement windows are shoddy and over-priced. Before making a final decision about whether to pay a loan of this type, make sure to obtain legal representation.

The other exception arises when you know that you will not be able to afford the home for the long term. Further payments after that point will generally go to waste.