Is It Possible to Keep Your Home During Foreclosure?
Despite the pandemic and a shaky economy, 2020 saw one of the lowest numbers of foreclosures in 16 years, down 57% from last year. It’s now 2022, and it seems like financial institutions are foreclosing fewer homes than was the trend more than a decade ago. If your home is on the brink of foreclosure, maybe you can salvage the situation.
Most of us have defaulted on loans for one reason or another. It’s sometimes easy to wiggle your way out of credit card debt, but not mortgages. The only way you can keep your home after defaulting on a mortgage is by paying back the mortgage, or so you thought.
Mortgage lenders are often strict with their terms and won’t hesitate to foreclose on your home when you default. However, there are a few ways to stop the foreclosure proceedings in their tracks.
In today’s post, we’ll be exploring a few ways to stop your home’s foreclosure.
What Makes Lenders Foreclose on Your Home
Contrary to popular thought, excessive debt obligations aren’t the only reason lenders can issue a foreclosure on your home. There are plenty of other circumstances that merit a foreclosed home. Here are some of them:
- Failure to pay homeowner’s insurance
- Using your home to conduct illegal activities
- Evading property taxes
- Transferring a property’s title without the lender’s permission
All of these activities are considered a breach of contract. If you’re engaging in any of them, your lender can foreclose on your home, and rightfully so.
Ways to Retain Your Home During Foreclosure
Taking the right steps early enough can help terminate foreclosure proceedings on your property. Here are a few ways to keep your home during a foreclosure.
Request a Forbearance
Temporary financial mishaps may prevent you from making your monthly mortgage payments. If this describes your situation, then maybe you can request a forbearance from the lender.
When lenders grant you forbearance, they allow you to stop making monthly payments for a specific period. The period when you don’t make the monthly payments is known as the “forbearance period.” You should use this time to get back on your feet so you can continue making regular monthly payments.
While forbearance certainly gives you a break from the mortgage, there’s a slight catch. At the end of the forbearance period, you’ll have to pay an amount equivalent to the forbearance period. This means if you had a 6-month forbearance, you’ll have to pay six months’ worth of mortgage payments at the end of it.
Basically, you’ll have to make a lump-sum payment for the missed payments during the forbearance. However, you can work out a repayment plan with your lender to pay everything off.
Try a Loan Modification
If you’re in the financial doldrums, you can try applying for a loan modification. As the name implies, a loan modification is an arrangement that modifies the terms of your current mortgage loan. Applying for one allows you to negotiate more lenient terms on your current mortgage.
One common type of loan modification is extending the term of your loan. That way, you’ll have more time to pay it off and keep foreclosure at bay. Some lenders may also agree to a slightly lower interest rate, but this is very rare.
Negotiate With the Lender
You can try having a sit-down with the lender and negotiating for better mortgage terms. It sounds far-fetched, but there’s no harm in trying. Remember, lenders are human beings and can be empathetic to your current situation.
If you’re facing a small setback, you should try explaining it to your lender. After that, you can work out a repayment plan to get you back on track. The lender can even give you a break to sort things out on your end, then ask you to resume payments when you’re ready.
If you decide to negotiate with the lender, remember to be completely candid about your financial situation. That’s the only way you can work out a repayment formula that works for both of you. Also, inquire about other mortgage relief options that are on the table for your situation.
Sell Your Current House
If you’re borrowing a mortgage for a second home and risking foreclosure, you might want to consider selling your current home. No one likes putting their homes up for sale, but your hands are pretty much tied. Sell your home and use the money from the sale to get your mortgage payments back on track.
Once you evade foreclosure, you can make plans to reacquire the home. Although there’s a likelihood you’ll pay a lot more than what you sold your home for, at least you got to keep your other home.
Of course, there’s always the problem of finding a suitable seller for your home. With a pending foreclosure, you’ll need to find a house buyer fast. Luckily, you can always sell your house to a “we buy houses” company and get your cash almost instantly.
Sell Some Old Items
If selling your house is too much to ask, you can always sell any other items that you have in your possession. Examine your current belongings and find one or two items that you no longer need. It could be an old car, TV, or furniture. Put these items up for sale and get some cash to resume your monthly mortgage payments.
This might not be a solution for the long term, but it’ll give you time to get your finances in order. You probably have dozens of items you never use. It’s time to get rid of them and make some money while you’re at it.
The internet is a great platform for selling all your extra items. You can list them on eBay, or even post them for sale on social media.
Sidestep Foreclosure and Keep Your Home
The above foreclosure prevention tips should help you keep your home when it’s on the brink of foreclosure. Foreclosure proceedings will test you to your wit’s end, but don’t let it get the best of you.
Check out the other posts on the site for more informative content.