As a homeowner, you're required to remain current on your mortgage payments. Depending upon the value of your house and the length of your mortgage's term, these payments could suck up a substantial amount of your disposable income. This could force you to make sacrifices that you didn't anticipate having to make during your initial home search. For instance, you could be forced to defer the purchase of a new car to replace your aging sedan. Alternatively, you could feel obligated to take out a home equity loan to take care of your family's basic needs. Such financial problems can promote feelings of inadequacy and may lead to marital disputes.
If you're falling behind on your mortgage payments, your home may be subject to foreclosure proceedings. These days, most mortgage lenders wait for at least three months before initiating the foreclosure process. In other words, you'll be able to live in your house for at least three months before your mortgage is officially judged to be delinquent. During that time, you can repay the outstanding balance on your mortgage loan without incurring any consequences.
If you remain delinquent after three months, you'll have to start looking for another place to live. While it can take months for a foreclosure petition to work its way through the court system, you may find it difficult to negotiate with your lender once such a petition has been filed. In most cases, you'll be able to avoid foreclosure only by repaying all of your outstanding debts. If you're already struggling to pay your bills, you probably won't be able to do this.
Fortunately, your mortgage lender can't satisfy your outstanding debts by seizing your tax refund. In order to recover the money that you owe, your lender will need to foreclose on your house and sell the property at auction. If this happens, you'll lose all of the equity that you built up in the house and may suffer serious credit-related consequences as well.
However, there are certain situations in which your mortgage lender may be able to seize your annual tax refund. If you've remained current on your actual mortgage payments but haven't made your semi-annual property tax payments, your lender is obligated to make them on your behalf. If this is the case, you're legally obligated to repay your lender in full. If you fail to do so, your lender may seize up to 50 percent of your annual tax refund without your consent.