Should you make mortgage payments during a short sale?
August 23, 2017

Do I have to miss payments to qualify for a short sale?

I plan to sell short. Should I make my mortgage payments anymore?

This is by far the most popular question asked by our Connecticut short sale clients. It is also the most difficult to answer, as we do not advise anyone to continue or to stop making their mortgage payments during a short sale. In fact, you'll be hard pressed to find any professional (lawyers included) to directly advise you here. Paying your mortgage during your short sale is matter of personal preference, and lenders do not have requirements either way. Here are the pro's and con's of each to help you make an informed decision:

IF YOU CONTINUE TO MAKE MORTGAGE PAYMENTS DURING YOUR SHORT SALE:

​​PROS:

  • Your credit will remain intact and the foreclosure process will not begin 
  • You can avoid endless harassing collection calls and letters from your lender
  • Although more difficult, it is possible to have short sales approved for borrowers who are current on payments

CONS:

  • Your lender may require you to default in order to consider you for the short sale, but they may not be upfront with this information, leading to a much longer short sale process
  • You will face much greater financial scrutiny and are at much greater risk of being asked to contribute cash or a promissory note in order to get the short sale approval
  • You will deplete funds that would have been otherwise available to you

IF YOU STOP MAKING MORTGAGE PAYMENTS DURING YOUR SHORT SALE:

PROS:

  • Your lender will be facing financial losses and will be more  motivated to pursue a workout with you, including approving your short sale more quickly and easily
  • You will face less financial scrutiny and have much less risk of being asked to contribute cash or a promissory note in order to get the short sale approval
  • You will have access to funds that would have been otherwise depleted, and are more likely to receive relocation incentives

CONS:

  • Your credit rating will decline with every missed payment
  • If enough time passes you will enter the foreclosure process and there is no guarantee your home will not foreclose
  • If foreclosure begins owner occupants will need to enter mediation - which will require going to court periodically

Minna Reid

Minna Reid is Broker/Owner of Reid Real Estate Group. Reid Real Estate Group is a full service Connecticut residential real estate brokerage, specializing in helping homeowners with legal and financial challenges including short sales, probate sales and tax lien complications.

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