Recessions can mean hard times for many. In some cases people lose jobs, in others the value of their assets fall. Sometimes people do things like take home equity loans out and invest the money, but during a recession this can mean losses, and this can lead to difficulty making monthly mortgage payments. If you find that you are in a position where making your monthly mortgage payment is difficult, no matter what the reason, you may want to consider trying to renegotiate your mortgage. If you are in danger of losing your home to foreclosure, this is often one of the best options you can pursue.

Lenders typically have several options available for borrowers that have shown a good payment history, but are in financial hardship, and are finding it difficult to meet their payment obligations. Renegotiating a loan with a lender is pretty simple and is an easy way to help you get your finances back under control so that you can keep your credit in good repair, and not lose your home. So, how do you renegotiate your mortgage? Well there are some steps.

The first and most important step to renegotiating your mortgage is to contact your lender. This is something that should be done right away when you start to notice you are having financial problems. For example, if you lose your job, do not wait until your payment falls due to call your lender, contact your lender immediately to discuss your options. Once you are late, your lender will contact you. So, you can wait for them to call you, or you can show you are serious about wanting to meet your monthly mortgage obligation, but are just in a poor position to do so. The lender will be more willing to work with you if you show your commitment. If you want to have the option of renegotiating your mortgage, it is imperative that you call your lender at the first sign of trouble, and not hold back information.

The second step to renegotiating a mortgage is to be completely honest with your lender about your financial situation. Your lender will likely send you some forms to fill out to show your debts, your income, and your other financial obligations. However, in addition to this they will want to talk to you about your situation. Do not tell them you think you may be getting a new job soon if you do not have prospects. Do not lead them to believe you are in a better position than you are in. It can be embarrassing to admit the financial position you have gotten yourself into, but if you are not honest, renegotiating your mortgage will do little or no good. Your credit will be significantly damaged if you agree to new terms that you are unable to meet, this is why it is always important to consider all your options before renegotiating your mortgage, and make sure you are honest with yourself and your lender. In addition to damaged credit, there is a good chance you will lose your home.

So, after you call your lender, be sure to have paperwork or proof that shows you are having financial problems. In some cases your lender will give you a form you can fill out to show "loss of job". In addition to that you will need to show bank statements, household expenses and monthly payment obligations. Your lender will probably want to pull your credit to get a fair look at your debts. They will want past paystubs, and any additional income reported. You will find that this is going to be used to determine your level of trouble. If the lender sees a too high of debt to income ratio, they may decide that renegotiating your mortgage will be a waste of time because you are too far in over your head. In other cases, they will see that a renegotiated mortgage will help you save your house.

Step three, if the lender decides from the information you provide, that you are eligible to renegotiate your mortgage, they will send you a packet of paperwork that needs to be filled out and returned. This is usually something that needs to be returned within a week. Do not put it off or the lender will not think you are serious. So, be sure to fill out the paperwork and return it as soon as possible. Once the lender has the paperwork, they can begin processing your loan, and help you set up new loan terms. Once that is processed they will send you the information of the new loan terms.

Step three to renegotiating your mortgage is to make sure that you can afford a renegotiated mortgage. In the past lenders were far more liberal with loans, and gave borrowers larger loans than they could actually afford, but made them affordable initially with adjustable rate mortgages with low initial rates. Once these rates adjusted and went up, the home became unaffordable. Even if your lender is willing to renegotiate your mortgage to make the payment more affordable, you need to determine if the overall size of the mortgage (not the payment amount) is actually affordable for you. If you bought a home outside your means, renegotiating won't do much good. So before you go to the trouble of renegotiating, make sure the home is not larger or more expensive than your income justifies. Also once you receive the packet with the new loan terms, it is incredibly important that you read through the terms carefully to ensure that you are happy with the new loan.

Step four is to determine what kind of renegotiation is going to help you most. If you find that the terms they send you are not going to work for you, you may want to ask about other options. Most lenders will be willing to do a couple of things, one they might be willing to give you a lower interest rate to make the payment smaller each month, or two they may be willing to give you a longer loan term to stretch the payments out over a longer period of time to make them more affordable month to month. If you are laid off, or take a salary cut because of the recession, either of these options could work for you. However, a lender is not going to just lower your interest rate without a convincing reason. This means they make less money. So, you have to show them how a lower rate or extended term is the only way you can make your payment, and not go into foreclosure.

Step five is to get a renegotiated mortgage that is better than the mortgage you currently have. If you have an adjustable rate mortgage you will want to renegotiate with the lender to get a fixed rate. Your lender may put you in contact with a loss mitigation specialist. This is the person that is going to help you determine the best solution to your mortgage problem. However, as a consumer you need to be wary of bad loans. It is never a good idea to renegotiate to a higher interest rate, but with an interest only payment. It is also not a good idea to significantly lengthen the term of the loan. Some lenders may even offer to give you a second loan to help you make the payments on the first. However, when you are in trouble with your mortgage, getting deeper in debt is the worst thing you can do. So, be very careful that you do not actually put yourself into a worse position. If you can refinance on your own this might be a better option. However, if you are upside down in your mortgage, or if the market has fallen too much, and the home isn't coming in at a high enough value, this may not be an option for you, so talk to your lender to find out what your best option is.

Step six is to consider if there are other options that may work for you, or if it would be more beneficial to have help in renegotiating your mortgage. You can contact a non-profit home counseling agent to have their expertise and help in renegotiating your mortgage. In some cases they will deal with the lender and in addition help you set up a budget so that you do not get behind again. Another option is to contact the "HOPE Now" hotline. This is a hotline set up by the Federal Housing Administration in conjunction with the Federal Housing and Economic Recovery Act. This act was passed to help homeowners get relief from too high of payments by aiding them to renegotiate mortgages to make the monthly payment smaller, and thus more affordable.

All in all, if you simply need a reduced payment amount to make it through tough times, renegotiating your mortgage is a good option. And because lenders do not want to foreclose on your home, they will be willing to work with you. This is a better option than ruining your credit.