Heading Off Foreclosure

by S. A. Johnson

Communicate With Your Bank

Rest assured, where foreclosure is concerned, you and your lender are on the same side. Lenders want your money and the interest that comes with it, not your house. If you seem to be a good risk, the lender will offer to help keep your mortgage afloat. But be forewarned: If you seem like a high risk, the lender may cut its losses by taking steps to foreclose and evict you as quickly as possible.

The key is to communicate the lender before your debt gets the better of you. The sooner your lender knows of your problem, the more help it can provide.

Ways to Ward Off Foreclosure

Here are some options your lender may offer you if you miss a payment and want to avoid foreclosure:

– Repayment Plan: If you have a short-term fiscal reversal (expensive car repairs, a medical emergency), your lender may provide some breathing room by agreeing to let you pay off your missed payment in two installments over the next two months.

– Loan Modification: Mortgage servicers can correct the terms of your loan — most often by lengthening the amortization schedule, lowering the interest rate or rolling the delinquent amount into the loan and re-amortizing the new balance — to help you bring the loan current.

– Short Sale: The bank allows you to sell the house for less than the outstanding loan amount, takes the proceeds and forgives any leftover debt.

– Short Refinance: The lender forgives some of your debt and refinances the rest into a new loan.

– Refinance with a “Hard Money” Loan: You won’t like the high rates and fees of a hard money loan — one from a individual lender — but it may give you time to sell your home and avoid foreclosure.

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