When the monthly payment rises on an adjustable-rate mortgage, or ARM, borrowers have a number of options. Most will simply continue to pay the mortgage, even if the payment rises along with the interest rate. Very simple, and a surefire way to prevent foreclosure.
What if it's impossible to make the monthly payments anymore, and you owe more than the house is now worth? See options.
When you fall behind on the payments, you'll talk first with someone from the mortgage servicer's collections department. The collections department's aim is to get you caught up, and the sooner the better.
That's fine as long as your financial problem is short-term and you can afford to catch up ... If that looks unlikely, you need to talk to someone in the mortgage servicer's loss mitigation department. More on a Repayment Plan
The loan servicer might agree to suspend payments for a few months, until you get back on your feet financially. A forbearance isn't for an indefinite period; it might be for one or three or six months, and after that, you'll be expected to make full payments on time. More About Forbearance
A loan modification is similar to a refinance: The lender agrees to alter the loan, but with few or no fees.
The lender might reduce the interest rate, change the loan from an ARM to a fixed-rate mortgage, or raise the monthly payment by a few dollars so you pay off the entire loan, including the past-due amount, by the loan's original end date. More on Modifying Mortgage
When you're past due on the mortgage and you realize that you can't catch up, call the loan servicer as quickly as you can, says Cate Williams, vice president of financial literacy for Money Management International, a national credit counseling agency. The phone number will be on the coupon book or monthly bill. Negotiating Tips That Can Save Your House