Are you currently struggling to make monthly mortgage payments on your home?
If so, you’re certainly not alone.
In fact, nearly 15% Americans than in the past say that they can’t currently afford to make payments on the homes they’re living in.
Whether you’re looking to make a short sell on your home, refinance your loan, or are even considering selling your home for cash to a qualified buyer, this post is here to help.
In it, we’ll tell you what a financial hardship letter is, and how it can help you to convince your bank to work with you to make payments for manageable.
We’ll then offer you tips on how to write a hardship letter that gets you the results you want.
What Is a Hardship Letter?
Before we cover how to write a financial hardship letter, let’s first talk about exactly what a hardship letter is, and when it’s an appropriate time to write one to your mortgage lender.
In general, the majority of people write a hardship letter to mortgage company when they’re home is in danger of being foreclosed on. (You may also have heard this referred to as a “hardship affidavit.)
Essentially, the goal of a hardship letter is to convince the lenders to modify your current mortgage plan and general loan. You may also need to convince the company to allow you to make a short sale.
In your letter, you’ll need to explain why you’re struggling financially, and how those problems came about in the first place. For example, if you can’t seem to keep up with your monthly mortgage payments, your lender will need an explanation of why.
You should expect to get incredibly transparent about your financial and perhaps even your personal situation in the content of your hardship letter.
After all, a mortgage lender isn’t exactly likely to give you lower payments or more time to make them because you went a little overboard on a shopping spree.
But if you’re going through a divorce or have been diagnosed with a medical condition that’s left you unable to work? They’ll be much more willing to work with you.
To that end, a financial hardship letter should also talk about what you plan to do to get out of the financial mess you’re currently in. Perhaps the solution you need is a few months of lower payments. Maybe you’re looking for a refinancing option.
Perhaps you’ll even sell your home, give the profits to the bank, and then have the rest of the loan forgiven.
Top Reasons for Writing a Letter of Financial Hardship
Let’s now take a look at the most common reasons why people end up needing to write a financial hardship letter to a lender.
This will also help you to determine whether or not your cause is, in the eyes of the bank, “legitimate” enough to make the effort of writing the letter worth your while.
However, even if you don’t see the reason for your financial troubles in this section, we still suggest that you consider writing a letter anyway.
Common reasons include:
- Sudden/wrongful termination from work
- The death of the higher-earning spouse
- A sudden military deployment
- A medical crisis that insurance couldn’t cover
- Debt brought on by addictions
- High credit card debt
- Home damage by natural disasters
As you can see, there are lots of reasons why people may find themselves needing to write a letter of financial hardship. The important thing is to be as detailed as possible about the specifics of these situations.
That’s what this next section is all about. Read on to learn how to write a letter that increases your chances of getting the results you want from your lender.
How to Write a Hardship Letter
First of all, you’ll need to make sure that you’re actually addressing your hardship letter to the right person.
To make sure that you’re on the right track, you should get in touch with your lender to find out how to proceed. In most cases, your lender will also require you to fill out a form relating to your financial hardship.
They’ll be able to tell you who to write to and where to send it and answer the more basic questions you likely have.
Make sure that, before you start thinking about the more complicated content of the letter, you include the basics at the top of it first.
These need to include your name and address, your contact information, the date of the letter, and of course, the account reference number that you’re writing about.
Now that we’ve gotten the basics out of the way, let’s move onto the deeper content of your financial hardship letter.
Start by Outlining the Letter’s Purpose
Your letter should begin by letting the lender know why you’re writing to them.
You can either choose to include the phrase “financial hardship letter” directly or work it in more subtly. However, we feel that the more direct you’re able to be, the less possibility there is for confusion.
A good start would be something like:
“We are writing to you to express our current financial hardship” or “This letter serves to outline how our present financial hardship is impacting our ability to make payments on our loan.”
You should then immediately make the request for the modification of your loan — don’t worry, you’ll go into more detail later.
Try something like, “Our current financial hardship has led us to request a short sale on our home” or “Our present financial situation requires us to modify our loan.”
Explain the Situation the Right Way
We know that, especially when you’re writing about a topic as sensitive as your financial situation, it can be tough to strike the right balance between emotional and professional.
You want the mortgage lender to take pity on you and feel for your circumstances. But you don’t want to come off as too angry, entitled, or even unstable.
The best way to explain your situation is as briefly as possible and as bluntly as possible.
Although you might enjoy calling your friends and complaining about how your husband cheated on you with your nanny and your neighbor and your kid’s teacher?
The bank really doesn’t care — and really doesn’t need to know that information.
Instead, try something like:
“My husband, the sole income provider for the family, and I are going through a divorce. I do not have the financial stability to pay for a divorce lawyer, take care of my daily expenses, and pay for rent on a new apartment while also making my mortgage payments on our shared home.
I am actively looking for and applying to jobs, but at this time, have not yet been able to find employment.”
This tells the bank what they need to know, nothing more and nothing less.
Outline a Budget
The final piece of your financial hardship letter should outline your monthly expenses and your current income.
This will help to paint a much clearer picture of your financial needs to the bank, and will also make it clear just how little you have left over every month to put towards your mortgage payment.
This budget should include you and/or your spouse’s monthly income. It should also include the total income of your household, and should likely reference the fact that you currently don’t have much in savings.
You should then list the cost of your mortgage payment, as well as any car loans that you’ve taken out and must pay for. The same goes for things like your insurance, your gas money, and even your grocery bills.
If you have children, the cost of their tuition and their childcare bills should also be included in the letter.
List credit card payments, utilities, and incidentals.
Then, let them know how much you’re missing every month, and how you’ve tried to lower your expenses.
End your letter by reminding your lender that you have every intention of paying what you owe.
Writing a Financial Hardship Letter: Wrapping Up
We hope that this post has helped you to learn what it takes to write a financial hardship letter.
Whether you’re able to refinance your mortgage or end up going with a short sale?
We want you to know that we’ll likely be able to come up with a fast and fair solution.
We’re committed to creating a “win-win or no deal” situation for both ourselves and, more importantly, for you.
Spend some time on our website to learn more about where we buy houses, how you can stop foreclosure with our help, and how to get an offer on your home in just a few days.
We look forward to working with you to ensure that you get the best possible offer.