Foreclosure is the process that lenders use to take property from borrowers. By taking legal action against a borrower who has stopped making payments, lenders are trying to get their money back. There is the whole process around it, and you need to know all the nuances to be 100% protected.
The Loss of the Foreclosure Right – Consequences
When you stop making payments, your creditor charges you penalties and legal fees. Any fees added to your account will increase your debt to the lender, and you can still get paid after your home is taken over and sold if sales revenue is insufficient.
Here are the main ways to delay foreclosure:
- Trade-off – Try to compromise with your lenders, which will give you the opportunity to stabilize your wealth and the ability to pay off your mortgage before the apt you rent is foreclosed.
- Short sale – If you receive an offer from a buyer, your lender should consider it. If you provide them with a good alternative, they may see it as a way to save the time, effort, and hassle associated with finding a potential buyer. While your home is up for sale, you will gain valuable time before your lender initiates the foreclosure process. Consult how fast the deal can be arranged when foreclosure approaches to see what steps you can take to find the money to pay off your loan.
- Bankruptcy – Bankruptcy postpones foreclosure. After filing for bankruptcy, federal law prohibits any debt collectors, including your mortgage lender. Therefore, when your creditor finds out that you have filed for bankruptcy, the foreclosure process will actually be frozen. Bankruptcy simply gives you more time to replace a lost job or recover financially from a temporary disability; it keeps you off the hook on your debt.
- Deed in Lieu – Deed in lieu is when a homeowner facing foreclosure signs a deed to return the home to the bank voluntarily. On the one hand, it is a great alternative. On the other hand, it has the same effect on the homeowner’s creditworthiness as a foreclosure. The main problem making lenders refuse to enter into such a deal is that they suspect that the borrower is pretending to be insolvent.
- Lease-Option – If you are facing foreclosure, you can convince your lender to let another buyer take your loan. The lender may want to assess the qualifications of the new buyer, and this may be a win-win for everyone. You may be able to negotiate a deferral with a buyer that you can use to pay off the outstanding balance of your overdue mortgage loan.
Explore alternatives to keep your home. If you know you won’t be able to make payments, find out which options are available to you. Even if you think it’s too late, there may still be a good solution. You can get help through government anti-borrower programs. And you can always follow any of the above tips.