7 Ways To Stop Foreclosure
Foreclosure is not something any homeowner like to think about, especially with the harden economical crises that are prevalent today. However, there are some ways to avoid going in the foreclosure crisis.
1. Settle your Mortgage on Time
The first thing is to make timely payment of your mortgage. This advice may sound simple however the one reason why homeowner faces the danger of foreclosure is missing on their mortgage payments.
If you are in a financial predicament and are not able to settle your debts, look out for those credit bills that need your immediate attention. Your mortgage is one of the most critical credit as it is linked to your home and failure to settle this payment can force the bank to go for a foreclose of your house. You can pay other payments later such as credit cards where these facilities are unsecured debt, and even in case of default, you will not risk losing your home.
2. Request the Bank for Adjustment in Settlement
If the situation is getting out of control, you have few options. You can contact the bank yourself or call your attorney to speak on your behalf. You may even approach a loan modification firm that deals in matters about mortgages negotiation with banks to modify the term of repayment.
Some ways to modify your current mortgage includes the following.
- The bank may approve your request to settle the back payments over some time. In this way, you can recover from the situation that happens to be the reason for missing your payment. For example, if you faced termination from employment and now are appointed elsewhere, the bank will approve your request to make the missing payments over a defined period. In this way, you can pay the missed amount along with your regular mortgage payments. For example, if you delay your payments amounting $12,000 you can pay an additional $1,000 over your monthly mortgage payment to pay off the outstanding $12,000.
- In other instances based on your previous payment record and the existing financial situation, the bank may put all the missed payments on the back-end of the mortgage. Through this approach, you will get the chance to settle the loan payments that are outstanding at the end of your loan term, and in most cases, the bank may even extend the loan term for your relaxation.
- You can request the bank to work out the new term of the loan. If you have faced a financial crisis and have recovered from the financial limitations that made you miss your payments the bank may be willing to negotiate your monthly payment, change your interest rates, or change the amortization plan(amortization is the tenure of the loan, for example, 20 years to 30 years). For instance, if your repayment is $3,000 a month and you can settle $1,500/month, the bank may agree to revise your monthly payments, change the interest rate, or convert the loan to the interest only mortgage. However, in any case, you need to make sure that you make your payment on time without further delay.
- The bank can combine these two options. For instance, they can put the missed payment at the back-end of the loan settlement and may also lower your monthly installments to settle the loan. If you can convince the bank to reshape your mortgage, you must commit to making regular payments going further; otherwise, you will face a quick foreclosure.
`3. Look for Ways to Increase your Income
There are some ways you can raise your income. If you are productive at your workplace, you may request for a raise in your salary. If you find it challenging to settle your mortgage with your existing job, you can look to work part-time and make more income. If you have a spare room, you can put it on rent. If you are in severe crisis and going for foreclosure, you may even sell your vehicle or other belongings to arrange for the payment. Nothing is worth holding on to if it puts your home at risk of going foreclosure so you may sell other belongings to keep your home safe from direct selling.
4. Refinance Option on Your Equity
If you hold some equity in your house, you can go for a refinance option to reduce your payment and get some quick cash to pay your missed payments. You should be careful though to make sure you don’t fall in the same predicament, and you make payments of all the debts of the new mortgage without any delays. With equity, you have the option to apply for the second mortgage or go for a HELOC. You cannot risk defaulting on your second mortgage as you face the same threat of foreclosing from the second mortgage owner that you do from the first one.
Another way to get out of this threat is to apply for Chapter 13 bankruptcy that is a “reorganization” way for you to prevent the foreclosure. You will have to settle amounts for the bankruptcy and still have to pay all the current payment in time. A Chapter 7 bankruptcy means forgiveness, but, the approval is unlikely as you have ownership of a tangible asset in for of a house.
The bankruptcy gives you temporary relief, and you have to make the payments as per the bankruptcy terms to keep your house. If you fail to make the payment, the bank may revoke the bankruptcy procedures and proceed with the foreclosure.
6. Sign a Deed-in-lieu of Foreclosure
You can settle the issue by handing over the house over to the bank. This approach means you do not have to sit through lengthy court proceedings and you will also avoid having the negative impact of foreclosure on your credit rating. You can do away with the house and continue with your life.
7. Put Your House Up For Sale
If you do not have the financial strength to afford the house, you can sell it. This selling can be the last option for you else the house will go on auction with a foreclosure stamp and you will have to move out of the house eventually.
If you have capital put the house for sale and do not go greedy. The only reason you are putting the house in the market for sale is that you are in financial crisis and cannot afford the house. You should look to sell the home quickly and if you can get what you owe to the bank or you can make some money yourself, do not wait for the better options as you are running out of time, and there are chances that bank comes forward with foreclosure before you get the chance to sell the house and settle your debts.
If the amount due on you is more than what is the price of the house, you can list your home at the current market value, or go a bit lower to attract buyers with the low cost. You can also work with a Realtor to negotiate with the bank for a short sale. In a short sale, the bank will settle for an amount less than what you own to pay the debt. Be sure that you get everything in writing, so there are no threats of banks to approach you for the difference amount. You do still have to pay the tax on any borrowed amount that is waivered as the IRS consider this as an income amount that you have to settle. You should also know that accepting the short sale is an option for the bank and they may even refuse this proposal.
You can hire the services of an expert Realtor and see how many days you have in the market in your area. If you have 120 days and foreclosure is just 45 days away, you need an aggressive Realtor who can sell your house, and you should inform your Realtor about the auction date in advance so the Realtor may approach your bank to further the auction date. Your Realtor will work on commission and will side by you if you have some equity in the house.
You can also look out for investors who are willing to take the property from you. Investors can pay you immediately, and they can close the sale in a matter of days. If you are a few days away from an auction you have no better option then to find an investor and get in a sales contract to get the auction delayed.
The investors may even offer you some other house to rent or find you a home that you can afford. They also have access to financial solutions and can work with you to get a loan for your new home and keep your credit score on a reasonable level.