How to Avoid Home Foreclosure
Mortgages are convenient instruments which allow you to finance your new home easily, provided you are able to make timely payments and pay off the debt along with the interest on it. However, if you fail to pay back the debt, on account of anything, including job loss, death and divorce, the lender has the right to foreclose, which means he/she will force the sale of your house to recover the debt you owe. Needless to say, the prospect of a foreclosure is horrifying for any home-owner, but there are a few steps you can take to avoid it.
Talk to the lender
Don’t ignore the lender, his calls or letters, since that will make your case even weaker. A lender who does not believe you will be making your payments will file a notice of default, which is something you need to avoid. Talk to the lender and discuss the possibility of alternative methods.
Work out a repayment plan
If you take the lender into confidence, he/she can allow you to work on a repayment plan. While the lender can forgive a few missed payments, such an instance is rare. On the other hand, the lender can allow you to pay a little more with every payment to compensate for the missed ones. This can work to avoid the foreclosure, provided you are able to make prompt payments in the future. The lender can also adjust the interest rate on your mortgage to make it easier for you to repay the debt along with interest payments.
Sell the property
If all else fails and the lender is uncooperative, you have limited options to stop a foreclosure. You should consult a real estate agent and get your house valued. Selling it might be your best option to pay back the debt and start afresh, without having to face foreclosure, which will destroy your financial future and credit ratings.
Short sale
A short sale is when you sell the property for less than what you owe the lender. The property is sold to another party and the lender collects all the money generated from the sale. However, since the proceeds of the sale do not compensate for the whole debt, the lender can either forgive the rest of your debt or seek repayment of the difference. Moreover, before you go for a short sale, you should consult the lender and seek alternatives that can benefit both parties.
