As far as I can tell, foreclosure could be the most single factor that will ruin your life to an unidentified period of time. With today’s tough economy, more and more people are heading toward this unavoidable destiny. If you defaulted on your mortgage and didn’t do anything about it for a while; then there is no other solution for the lender except proceeding with foreclosure. Paying the mortgage is easy only if your pay is good and you have a stable situation. However, as soon as something happens to you (job loss, illness, loss of additional income, increased taxes, other debts…etc), you’ll be forced into taking action if you want to avoid the devastating consequences that a foreclosure can produce.
Foreclosure isn’t only annoying for the homeowner. It’s also considered as a non preferable choice even for banks. However, if they have to protect their properties; then they’ll not hesitate a single minute to foreclose on your property. The worst thing that a homeowner could do is ignoring the lender’s letters. If you do that then you’ll only make it tougher for you. The thing you should keep in mind is to contact the lender as soon as you’re not able to afford any further mortgage payments. There are several options that make you avoid foreclosure and there are several others to stop it. However, it’s up to you and your lender to decide which one is more suitable for you both
Ways to avoid foreclosure:
1- Changing the terms: when you contact the lender, you might come to a solution of changing several terms in your first mortgage agreement. These terms can be: the interest rate, extend the payment period…etc
2- Forbearance: This only happens when you face a circumstantial or short term financial hardship. The lender may suspend or at least reduce your mortgage payments until you’re established again. The bank will only approve this if you have 1 to 2 missed payments. So try to act as soon as you face any financial problem. This option can also be combined with other options like the ones discussed bellow.
3- Debt forgiveness: this decision is rarely taken by the lender. It means that the bank will forget about your few missing payment only if you agree that you’ll never fall short again.
Ways to stop foreclosure:
If you don’t act quickly when you miss several mortgage payments, then the lender will fill you a default notice. When this happens, you’re going to end up with very limited options (that’s why you need to act faster). If you manage to repay those missed payments, then your bank may issue you a reinstatement of your loan. However, if you can’t pay; then here are several other options to stop foreclosure:
1- Short sale: This option is probably what people are doing right know as it has the least negative effects on you. If your house value happens to be less than your mortgage balance, then you might consider short selling your property. If you happen to get approval from the bank, you should proceed with the house sale as soon as possible.
2- Deed-in-lieu: This option is considered as the last resort if nothing works for you. In order for you to avoid foreclosure and its various effects on your credit, you might want to give back your property to the bank. I know that making this decision is very tough, but at least it won’t affect your credit rating.
No matter what option you choose, you need to act as quickly as possible and not ignore the lender’s letters. If you act sooner, then there will be tons of option that you can consider without receiving too much damage.