8 Alternatives To Foreclosure
Know The Pros
and Cons of Alternative Solutions to Foreclosure.
There are many options
available to local residents facing foreclosure. Here is a brief summary of
several solutions. You may have other options available.
Your foreclosure prevention
options may include:
your payments current (also, "reinstatement")
You pay your lender the full amount due, including all back payments, fines
and fees. Although this is often difficult, you may get a new job, get assistance
from family, cash-in other assets, etc. Homeowners can reinstate a mortgage
up to the day before a final foreclosure sale, and it doesn't require lender
For homeowners who have mortgage payments low enough that a rental payment
allows the loan to be paid. With rental properties, however, many expenses,
taxes, insurance and landlord responsibilities are a factor, and rental
income may not cover the full cost of ownership and maintenance. If a solution
for you, you can keep the property indefinitely while living somewhere else.
If you can make payments on your loan, but don't have enough money to bring
your account current, your lender may change the terms of your original
loan to absorb your delinquent payments and make the payments more affordable.
Your loan could be permanently changed by adding the missed payments to
the back end of the existing loan balance, or lowering the interest rate
or making an adjustable rate fixed, or extending the number of years you
have to repay your loan. Homeowners must qualify for the new payment and
requires full documentation. Because of additional debt such as credit cards,
car payments, medical bills, and student loans, some people do not qualify
for a loan modification.
If you have enough equity in your home and your credit is still in good
standing, you may be able to refinance an unaffordable loan and achieve
lower payments. With today's housing values and the costs of refinancing,
a homeowner must be sure a refinance is a possible solution. If you purchased
your home with little or no money down or your home has gone down in value,
you may not quality for a refinance.
plan (also, "forbearance")
A forbearance agreement means you pay only a portion of your regular payment
-- or no payment at all -- for a specific period of time based on your current
financial situation. This temporary solution provides time to save money,
pay off other bills, find employment or additional employment, or recover
from injury or illness. At the end of the forbearance period, you begin
making regular payments as well as an additional amount to pay off the past-due
amount. Active duty military service members may be eligible for special
mortgage relief assistance.
In some situations and in some states bankruptcy stalls the foreclosure
process (typically for six months) and may allow you to live in your home
and repay your lender under different terms. If a homeowner has significant
non-mortgage debts that prohibit you from making your mortgage payment --
and a personal bankruptcy will eliminate these debts -- bankruptcy may be
an option. The problem is most people that go through bankruptcy have not
solved their problem. If you cannot afford your home, you may end up in
foreclosure again within a short time. Bankruptcy is expensive, damages
your credit and can only be declared once every seven years.