Considering the economy today, it isn’t surprising that lots of people are having trouble paying their mortgage. Being late in payments for one week or one month is tolerable, but any more than that could produce the scare of foreclosure. At this point, it wouldn’t be surprising if most homeowners find themselves panicking about the prospect of losing their home.
The good news is that a looming foreclosure is not the end. Lots of homeowners have managed to avoid this problem, successfully reclaiming their homes. For those who are currently worrying about this situation, here are some of the best ways to get out of foreclosure.
Talking with the Lender
Believe it or not, lenders do not want a foreclosure too. With the situation of the real estate industry today, foreclosures are often costly and would not really guarantee their money back. This is why they give homeowners so much time in between to contact them and make arrangements. Take advantage of this time by facing your obligations head on instead of hiding. Try negotiating a modification of the loan for easier monthly payments. The lender may also suggest some of the following methods to catch up with the mortgage:
- Forbearance – this is when homeowners are allowed to catch up on their missed payments by making partial payments.
- Repayment Plan – This means adding a certain amount to monthly plans in order to make up for the missed months. This usually lasts for only several months until the homeowner is once again up to date with his mortgage.
- Reinstatement – this is when homeowners are just thrown off schedule by a temporary setback. If they are confident that they can pay the mortgage in lump sum, then a reinstatement agreement is entered into. With this, homeowners can pay off the missed months in one go and continue where they left off.
Stop Foreclosure Loan
Choosing to borrow money from the bank to finance the loan is also a good idea, although it requires some thought. Remember that this basically means taking a non-urgent loan to finance an urgent one. If done improperly, a desperate homeowner could end up with a loan that charges a much larger interest rate.
One way to immediately stop foreclosure is by selling the home for less than its value. Some homeowners do not want this since it means losing the property but in some cases, it’s the best option. For example, the home is worth $200,000 but will only be sold for $170,000 with the approval of the lender. Although this may seem disadvantageous on the part of the homeowner, it’s actually a good idea if they owe more on the mortgage.
As the name suggests, this means selling the home and paying the proceeds of the sale to the lender. This is only ideal if the home can be sold for more than what is owed. For example, if the home value is at $250,000 and the mortgage is set at only $200,000 then an outright sale will be better than a short sale.
Although there are numerous options for stopping foreclosure, the best one is definitely the first suggestion – talking with the lender. Lenders appreciate it when their borrowers are upfront about the situation because this means they have every intention of paying. Hence, skip the “hiding” and instead go straight to honesty and candor. This usually gets the most favorable results.