What is a mortgage reinstatement?

Missing some mortgage payments might make you feel nervous or scared about the possibility of losing your home, and that’s totally understandable. Fortunately, mortgage reinstatement is a solid option that can keep a foreclosure from happening.

What is a reinstatement?

Mortgage reinstatement is a “catch up” method to restore your loan. Read on to learn how you can get your payments back on track and also to check out some alternative options that might be available to you.

What is a mortgage reinstatement?

What is reinstatement, exactly?

Mortgage reinstatement, also sometimes called loan reinstatement, is the process of restoring your mortgage after a mortgage default by paying the total amount past due.

Mortgage default happens when homeowners no longer uphold the terms they agreed to in their promissory note or deed of trust when they took out their mortgage. The most common reason for default: Failing to make mortgage payments.

The good news: Foreclosure doesn’t happen immediately. Lenders can ask homeowners to make a payment on their outstanding balance if they’re 30 days overdue on their payments, but lenders legally need to wait 120 days before they begin the foreclosure process.

Mortgage reinstatement helps homeowners catch up on payments and cover any late fees to restore their mortgage to good standing. After that, they'll continue to make regular monthly mortgage payments for the remainder of their loan term (the number of years left on their mortgage loan).

Here’s an example of how reinstatement would work: Let’s say a homeowner misses 5 months of mortgage payments. They’d repay their 5 months of payments in one lump sum, including all fees.

What is a mortgage reinstatement letter?

A mortgage reinstatement letter is how you ask your lender for the full amount (including fees) you owe, months missed, payment instructions, reinstatement quote expiration date, and more. (Note the expiration date, also called a “good through” date, can expire quickly, and a different amount might be due after the initial expiration date.)

A mortgage reinstatement letter should include:

• Your contact information
• Date of the letter
• Request to reinstate the mortgage
• Reason for missed payments
• Commitment to pay the full reinstatement amount with demonstrated funds, such as back pay owed to you, a tax refund, a bonus, or family help
• Request for a reinstatement quote
• Preferred method of communication
• Polite closing and signature

Consider contacting your servicer to learn more about other information you should include in your letter. Once you send your letter, your lender will send your reinstatement quote.

Reinstating a mortgage before foreclosure: How does it work?

If you fall behind on your mortgage payments, reach out to your lender right away for a reinstatement quote to learn the back payments and late fees you owe. Consider restoring your mortgage before foreclosure – once the foreclosure process begins, reinstatement will likely require you to pay steeper fees.

In general, here are the steps:

• Ask for a written reinstatement quote, including the average mortgage reinstatement fees.
• Repay the full reinstatement amount according to the payment instructions you receive.
• Continue to make regular monthly mortgage payments for the rest of your loan term.

How long does mortgage reinstatement take?

You generally have 90 days to bring your loan current and pay off your past due payments and fees, but check with your lender for more information.

Loan reinstatement vs. loan payoff

Loan reinstatement and loan payoff mean two different things, but both options may be open to you. Loan reinstatement allows you to restore your loan, while loan payoff means you repay your entire mortgage outright. 

After a loan reinstatement, you resume making regular monthly mortgage payments and continue to keep up on your payments until your loan term is over.

A loan payoff, on the other hand, requires you to pay your full outstanding loan balance. For example, if you owe $180,000 on your mortgage, you’d need to come up with the full amount, which is likely a more expensive strategy than reinstating your loan.

The law requires your servicer to send a payoff statement within 7 days of a request unless the loan is in bankruptcy or foreclosure, unless you have a reverse mortgage, or unless you failed to follow the servicer’s requirements for making a payoff request.

Can you negotiate the terms of your mortgage reinstatement with your lender?

You may be tempted to ask your lender for different terms, but since reinstatement is based on the actual amount you owe, you can’t negotiate with your lender.

The good news is that you can explore other options to avoid foreclosure, such as:

• Loan modification: A loan modification gives you a new loan with new terms that allows you to resume mortgage payments without paying back what you owe in a lump sum. Your missed payments get added to your total principal balance with a new maturity date.
• Repayment plan: A repayment plan allows you to take on your regular mortgage payment, but with an added extra amount until you’ve completely taken care of your missed payments.
• Deed in lieu of foreclosure: You can also consider a deed in lieu of foreclosure, meaning you give the house back to your lender and your lender agrees not to foreclose on your home.

Check with your lender for more information – additional options may be available to you.

Can you reinstate your mortgage after foreclosure?

You may still have the opportunity to pursue mortgage reinstatement after the property has entered the foreclosure process. In fact, doing so can stop a foreclosure in its tracks.

As mentioned earlier, it can be more expensive to reinstate your mortgage once your lender has initiated foreclosure. You’ll need to pay all your delinquent loan payments including interest, late charges on delinquent payments, any funds your servicer advanced (to protect the security or for taxes or insurance premiums), costs of a preforeclosure property inspection, and all extra expenses, such as lender attorney fees.

However, initiating reinstatement at any point may keep your home from foreclosure!

The bottom line: A mortgage reinstatement can help you keep your home

When you suffer a job loss, when medical bills or a natural disaster hits, or when you face other challenging financial situations, making mortgage payments can be difficult.

A mortgage reinstatement offers one way (but it’s not necessarily the only way!) to avoid foreclosure. Writing a mortgage reinstatement letter to your lender can give you clarity about how to bring your mortgage up to speed.

It’s important to let your lender know you’re struggling right away – they’re there to assist you. Look into more resources for additional help.