Mastering mortgage debt: strategies for home loan upkeep

By Lindsay Vansomeren

Reviewed by Kimberly Rotter

May 27, 2024

Read time: 5 min

young couple using a digital tablet while relaxing on the couch at home

Key takeaways:

  • Any loan that’s guaranteed by real estate is a mortgage. That includes home equity loans and HELOCs.

  • Mortgage debt is generally considered a type of good debt. Good debts are those that could increase your net worth, enhance your quality of life, or both. 

  • If interest rates have fallen since you got your mortgage, you could consider refinancing to a new mortgage with better terms. 

You’ve worked hard to reach homeownership. It’s one of life’s major milestones, and you deserve credit. A mortgage represents an opportunity to stake out your own little part of Earth, and build wealth through homeownership. Taking a few steps to learn how mortgage debt works can set you up for long-term success. Think of it like driving toward your financial goals. You're steering toward stability.

After all, if you’re like most people, your mortgage is the largest debt you’ll ever take out. A large debt like that can be scary. But it doesn’t have to be. 

Let's uncover the ways to handle mortgage debt with confidence.

Understanding mortgage debt

You might have heard people call your mortgage a “ good debt.” That’s true for most homeowners. Many people consider a debt to be good if it increases your net worth, or if it’s used on something that significantly improves your life. A home should do both.

Taking out a mortgage to buy a house—and then paying down your mortgage balance—helps to grow your family’s wealth. Homeownership could also create financial opportunities. You may be able to borrow against your home’s value in the future with a home equity loan, such as if you want to add on a new nursery or mother-in-law apartment for your family.

Mortgage debt is a type of secured loan, where your home acts as collateral. If you were to ever default on your debt (more on that below), your lender could take the collateral—in this case, your home. 

Collateral is something of value that you pledge as a guarantee that you’ll repay the loan. Having collateral reduces the lender’s risk of loss. That’s why lenders generally charge a much lower interest rate on mortgage debt than they do for unsecured debts like credit cards or even personal loans. Lower rates are what help borrowers get an affordable monthly payment on a very large purchase.

Managing mortgage debt

There are many things you can do to make sure dealing with your mortgage debt is as smooth and stress-free as enjoying a cookout on your back patio with your friends and family. Let’s look over the most important strategies to manage your mortgage debt. 

A great first step is to make sure you never pay late. A smart way to do this is to sign up for autopay with your lender so that your monthly mortgage payments are automatically pulled out of your account. 

Pro tip: Schedule your monthly mortgage payment for right after you normally get paid, so you know you’ll always have the cash to cover it. 

Making your monthly mortgage payment isn’t always easy, but lots of people find that making a regular habit of checking in with their budget throughout the month can help. That way, you can set limits for how much you spend on different categories, which helps you ensure you’ll always have enough cash to pay your bills. It’s also a great way to make sure you’re able to save up for emergencies, home repairs and maintenance, holiday spending, and life’s other expenses. 

Making changes to your mortgage

Mortgages last for a long time (usually 30 years), but you’re not stuck with yours for that long if it’s not working for you. It’s a smart move to keep your eye on the broader economy. If mortgage interest rates fall, you might save money by trading your mortgage out for a new one. This process is called refinancing. You take out a new home loan to pay off your old mortgage debt. 

Finally, consider whether you should pay down your mortgage faster. Many people do this by sending in extra money each month with their payment. You can also send in extra cash as you get it, such as from tax returns, bonuses, or gifts. A small extra payment you make today can help you save in the long run, and speed you even faster toward a paid-off home. 

Pro tip: Round your monthly payment up to the nearest $100. You could pay off your mortgage ahead of schedule.

What happens if you default on your mortgage?

If you fall behind on your mortgage, homeowners’ insurance, or property taxes, your lender may consider you to have defaulted on your mortgage. You have many ways to fix the situation. 

If you default on your mortgage, the collections department may try to contact you, and you may be charged extra fees for things like overdue payments. Eventually, your lender may foreclose on your home. You’d lose the home, and your credit standing would suffer significantly. Don’t despair, though; there are many ways to prevent this from happening:

  • Ask your lender about payment assistance options such as forbearance or loan modification. Forbearance is when your lender allows you to skip one or more payments. Loan modification is when the lender rewrites the terms of your loan, such as by lowering your interest rate, to make it easier for you to get caught up and stay caught up.

  • Reach out to a HUD-approved housing counselor to learn your options.

  • Call or reach out to 211.org to get help finding local programs and resources that may help you.

  • Talk to your lender about a short sale or deed-in-lieu of foreclosure if you can’t find any other options. A short sale means selling the home for less than the amount you still owe. In some (but not all) cases, the lender will forgive the difference. A deed-in-lieu of foreclosure means the lender is allowing you to just walk away. They take ownership, and you're relieved of the debt.

  • Negotiate with your other creditors to free up cash for your mortgage. If you have a financial hardship, your unsecured creditors (credit cards, personal loans, and any other debt that isn’t tied to collateral) may be willing to work with you and even forgive a portion of your debt. Resolving those debts could relieve your budget to the point where you can afford your mortgage. 

Reaching out to your lender for help can be especially scary, but remember: it’s in their best interest to work with you on a solution. No one wants to go down the foreclosure road if possible. And the earlier you act, the better. 

What’s next 

It’s a great feeling when you can manage your mortgage debt well. Here’s a list of quick steps for how to get there:

  • Sign up for autopay for your monthly mortgage payments.

  • Create a monthly budget and get into the habit of using it on a regular basis. If money is tight, having a budget could help you find ways to decrease spending or increase income so that you can afford to keep up with your mortgage payments. 

  • If you’re struggling, reach out for help. Caring debt experts are available to find out about your situation and walk you through your options. 

Lindsay Vansomeren

Lindsay is a writer for Achieve. She's passionate about helping people learn how to manage their money better so that they can live the life they want. She enjoys outdoor adventures, reading, and learning new languages and hobbies.

kim rotter 2022 2

Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.

Frequently asked questions

Mortgage debt could help or harm your credit score. Anytime you apply for a new loan, your score is likely to nudge downward for a little bit. Once you have the loan, three things matter:

The payment history. This is the most important. Paying late could hurt your credit, and paying on time should have a positive impact.

The account age. Credit scores look at the average age of all of your credit accounts. If you got a mortgage 10 years ago and you got a credit card 5 years ago, your average credit age is 7.5 years. Having old credit accounts is better than having new credit accounts.

The type of account. A mortgage is an installment loan account. A credit card is a revolving debt account. You get points for showing that you can handle different kinds of credit accounts.

You may be able to deduct your mortgage interest from your taxable income when you file your tax return if you itemize your taxes rather than take the standard deduction. Your taxable income is the amount of money you earn that you need to pay taxes on. It’s calculated by subtracting a standard amount from your income (the standard deduction) or by subtracting specific items (itemized deductions). Consult a tax professional about your situation if you have questions.

A home equity loan is a type of mortgage. Mortgages are loans that are secured by real estate. 

Home equity loans are limited by how much equity you have. Home equity is the difference between what your home is worth and the amount you still owe on your mortgage. 

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