If you are facing the task of how to stop foreclosure, knowing some details about your existing financial status will determine what options you have. Two people who have completely opposite financial circumstances will have completely different options to choose from. Some financial circumstances and the resulting options are outlined below.
If You Can Resume Making Monthly Payments Now and Into the Future
If your current income allows you to continue making the monthly payments, but you are not able to make back payments you are in good shape. Below are your possibilities.
Negotiate with the lender to modify the loan into paying a little more each month or increase the term of the loan. Or you can search for a better loan with a different lender in order to refinance the old mortgage. However, try to improve on your current situation with a better interest rate. Lastly, you can bring the loan current by paying missed payments as soon as you can by using funds from family and friends, or liquidating some belongings, or find a second source of income. Then vow never to incur back payments in the future.
If Your Income Level Allows For Other Than the Full Monthly Payment
Bankruptcy can be an option in this case. You would have to make an agreement with the judge to pay off your debt as your situation permits. Bankruptcy may be the best course of action for those with numerous debts, which is normally the case with those involved in a foreclosure.
This method will help you to organize your financial issues, but also assist you to stay in your current home. It is important to have an attorney to assist you with this option especially one that works primarily as a bankruptcy attorney. It can be handled on your own if you do your research and get expert advice.
If You Are Unable to Make Any Consistent Monthly Payments
Typically, when you are facing long term grave financial circumstances it will not be possible to save the home. The faster you come to this realization the more positive the outcome will be. When you think about your situation in this way, then walking away from the home will be a positive step in vastly improving your overall financial picture when at one time you felt trapped.
In some circumstances renting the property could be a viable option. This is especially true if the house could be rented for an amount that would cover the monthly loan payment. But always remember that a landlord has to pay some property expenses and also has the risk of the renter not paying on time or not at all. It would be best to discuss this option with the lender and get their approval.
If losing the house seems unavoidable, you should always try to sell it yourself rather than let the lender have it through foreclosure. Of course this may take a while but if you show the lender that you are doing this, they may agree to wait.
If the market value of the house is larger than the amount you owe on the mortgage, you can pocket some cash and come out of the ordeal with a decent credit rating as well. You could then apply for a new loan with the profit as a down payment and purchase a more affordable home.
If the market value of the house is less than the amount owned, y may be able to refinance the remaining amount owed after settling the partial debt. This is called a “short sale” and must be approved by the lender since they are in possession of the deed. Basically, you hand over to the lender the amount you sold the property for and the lender accepts that amount as payment of the loan. Banks favor this process rather than foreclosure since they do not have to pay the legal costs.
A short sale is likely to affect your credit rating because usually, it will show as less than full settlement of your debt. You may be able to avoid this by consulting a debt law specialist. But even if you cannot, this is still better for your credit rating than allowing the foreclosure to go ahead.
There are many ways to avoid home foreclosure and they all have merits in different situations. So when you are looking at how to stop foreclosure, be sure to consider all of your options.
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