When a natural disaster like a flood, hurricane, or wildfire hits your home, it can be difficult to know where to begin on the path to recovery. What happens to your mortgage if your house is destroyed or you can’t make your payments? 

The first step is to notify your lender or loan servicer as soon as possible so they can help you avoid penalties and get back on your feet. Here are a few scenarios to consider. 

If Your Home is Destroyed

Unfortunately, even if your house is a total loss, you are still accountable for paying your mortgage. Your mortgage contract may require that you repair or rebuild the property, and you’ll need to coordinate that process through your lender and homeowners insurance company. In the meantime, ask your lender to suspend or lower your monthly payments. 

If You Can’t make your payments

Natural disasters can have a significant financial, physical and emotional impact on those affected. If you can’t afford to pay your mortgage in the wake of a disaster, it’s essential to let your lender know. You may qualify for a forbearance, which suspends or reduces your payments for up to six months. The loan will continue to accrue interest during that time, but you’ll avoid late fees and damage to your credit. Whatever you do, don’t simply stop paying — that could make your financial situation worse.

For FHA loans, lenders are required to implement an automatic 90-day foreclosure moratorium for borrowers in presidentially-declared disaster areas.This prevents the lender from initiating or continuing foreclosure proceedings, giving borrowers time to seek assistance.

If you need additional assistance 

Federal disaster assistance is available in the form of low-interest loans from the Small Business Administration and supplemental FEMA grants. A housing counselor approved by the Department of Housing and Urban Development (HUD) can help you evaluate your situation and explore your options to avoid foreclosure.

Open Mortgage is invested in educating and supporting homeowners, empowering you to make good decisions for you and your family in times of uncertainty. Speak with one of our loan originators today to discuss your mortgage needs.