When faced with unaffordable mortgage payments, your house can feel more like a cage than a home. You may feel trapped because it’s hard to know what to do to improve your situation, and you may just want to give up.
Don’t give up!
The reality is you don’t have to be a prisoner to a mortgage you can no longer afford. You have options and you’re not alone. This article can help you find the key to financial stability through education and a greater understanding of your alternatives.
Learning Your Options
You actually have many options when it comes to seeking relief from challenging housing payments. When reviewing the following list, think about which alternative may be best for your specific situation.
Generally considered one of the most viable alternatives to foreclosure, short sales allow homeowners to minimize financial damage and move on from a burdensome, unaffordable mortgage. In many cases, short sales allow borrowers to qualify for a new mortgage in as little as two years, as opposed to five years or more after a foreclosure.
A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these.
A reinstatement is the simplest solution for a foreclosure, but often the most difficult to achieve. The homeowner simply pays the total amount past due (including late fees) to the lender.
Deed in Lieu of Foreclosure
Also known as a “friendly foreclosure,” a deed-in-lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process.
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back-payments over a period of time.
Rent the property
This option requires the homeowner’s ability to rent the house for enough money to cover the monthly mortgage payment.
Servicemembers Civil Relief Act
If a member of the military experiences financial distress due to deployment-and their debt was entered into prior to deployment-he or she may qualify for relief under the Servicemembers Civil Relief Act.
Many believe bankruptcy is a “foreclosure solution,” but this is only true in some states and situations. Entering bankruptcy can be a risky and costly process. Be sure to seek the advice of a qualified bankruptcy attorney when pursuing this as an option.
Refinancing means you will acquire a new loan based on your current credit standing. If you have already missed mortgage payments, your credit score may make it difficult to find a loan with cheaper payments.
Now that you know about the alternatives to foreclosure, you have the power to act!
Whether you’re struggling with the mortgage today or are months behind on payments, it’s important to choose an option that best suits your needs and get to work. The fact that you are reading this article is a great start!
The following are steps you can take if you are delinquent, or on the verge of missing a mortgage payment.
Your First 3 Steps in the Right Direction:
1. Gather financial information (bank statements and paystubs from the last 3 months)
2. Communicate with your lender that you will be seeking foreclosure avoidance counseling
3. Contact an educated real estate professional (who specialize in foreclosure prevention) to learn more about foreclosure avoidance
By taking a proactive stance as early as possible, you better your chances to successfully avoid foreclosure.
Why Should I Avoid Foreclosure?
This is a great question, especially during a time when it has become increasingly popular to “strategically default,” or discontinue making mortgage payments even if you can afford to.
The simple answer here is that allowing yourself to foreclose is never strategic, and will always have far reaching consequences in your financial future.
The more detailed answer involves the actual consequences of foreclosure, including (but not limited to):
– Inability to secure financing for a home or car in the future
– Potential challenges to current employment
– Potential challenges to future employment
– Potential challenges to securing an apartment or rental
– Loss of security clearance
As you can see, if you feel trapped by mortgage payments now the consequences of foreclosure will present challenges well into the future. The hard work you put into facing this now, will put you on a path to a more financially stable future.