Facts about foreclosure
If you have taken a home loan to purchase your home and have not been able to pay off the mortgage, your lender has the legal right to foreclose your home i.e. legally own it and auction it off keeping the proceeds to pay off the mortgage.
When mortgage laws originated, there was a provision that the owner of the mortgage or the mortgagee would automatically confiscate the property of the home owner. But, over the years the law developed and the mortgagors were allowed more time to be able to pay off their loans before their property was taken away. However, after foreclosure, if your lender is unable to sell your house for the value it owes, then there could be a deficiency judgment purchased against you. Both a foreclosure and a deficiency judgment can cause you trouble in future with your credits.
What are your options in a foreclosure?
When you see that your property is about to get foreclosed, you can explore your options instead of panicking and losing out on time. Your options may include:
- Get in touch with a housing counselor: Certified counselors will analyze your income, expenses as well as debts and help you determine the best alternatives you can use to your benefit and avoid foreclosure.
- Borrowing money: You could try borrowing money from loved ones if they are willing to lend. If you explain your situation, your friends or your family could help you financially. If you had a co signer when you took your mortgage loan, go to that person for help and see if you can receive any. Honesty is the best policy. Don’t hide your situation and be honest about how long you will take to repay the loan.
- Co ordinate with your lender: Not all lenders are the same, some are co operative. Even if cooperation from a lender would be the last thing on your list, you could still try. You could contact your lender and see if he can give you a better deal by which you may pay off the mortgage. You can seek loan modification if your lender agrees to it and also if you think you can afford it.You could also seek loss mitigation but be very honest about when you can repay the loan. Whatever you both agree to, insist on keeping a written record of the same. Make sure you understand each term mentioned in the document.
- Seek refinance: It could be that when you bought your home, the interest rates were high and hence your installments are high too. You could seek refinance at a lower rate of interest in order to avoid foreclosure. Simply shop around for a better deal.
- Selling the house: If the value of your home is such that you simply cannot afford it, may be selling it off would be a good option. If you are thinking of selling the house yourself to avoid foreclosure check out if there is any complaints against the person you are selling it to. Besides, you also need to be realistic about the price. You must not charge more than what your house is worth. It might also be that you may have to sell the house at a lower price than what you bought it in. Be prepared.
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