Having a home of your own is still the dream of many, but plenty of situations arise over the years that make it hard to pay or make the mortgage payments on time. A medical crisis in the family or layoff from your career field can certainly make paying those high mortgage payments unbearable. There are several options available where you can keep your home to avoid foreclosure and others where you can give up your home to the lender.
Modifying The Existing Loan
Loan modification will allow you as the homeowner to stay in the home through renegotiation of the terms of the loan. This can include adjusting the term of the loan, reducing the principal of the loan and adjusting the monthly payments to a lower amount to allow you to be able to make the payment. The loan could be refinanced altogether to ease the pressure of catching up any back payments that you could be behind on. You should keep in mind that going this route could add years to the end of the loan.
Surrendering Deed In Lieu Of Foreclosure
This is the easiest alternative because it involves you turning your home and property over to the lender without the proceedings involved in typical foreclosure. It can go against you on your credit rating because the lender will probably lose money from having to sell the property below the original value of the loan. The lender may require the borrower to pay for a title search before agreeing to the surrender.
In some instances, you probably will get away with your credit rating intact. Some lenders frown on homeowners who can’t make their mortgage payments and try to ensure that they have trouble with their credit when trying to purchase another home at a later time. Read more.
Negotiating With The Lender On Payment
If you’re having problems meeting your monthly mortgage payment, restructuring the loan might be the solution. Not every lender will do this, but some will work with you when you have problems repaying the mortgage through no fault of your own. This can allow you to catch up those past due payments during the future to keep your good credit and stay in your home.
A restructuring of your mortgage loan is a good idea if you are ineligible to refinance, want to refrain from refinancing or are several months behind on payments. If you’re capable of paying your home mortgage, but need those payments extended into the future because of a financial hardship, this could be the solution to your troubles.
Short Sale Negotiation
After the crash of 2008, the real estate market took a big hit along with everything else in the economy. Many homeowners lost thousands of dollars almost overnight on their homes and property when appraised values dropped. Most homes today are worth far less than the mortgages owed on them because of the crash and homeowners borrowing against those mortgages over the years.
If your mortgage is higher than the net worth of your home and you have financial problems making payments, you might seek a short sale of your property. All this means is that the lender has agreed to accept less money than what is owed on the loan and release any liens against the property in lieu of payment.
Filing A Bankruptcy
Filing bankruptcy can definitely affect your credit status, but it doesn’t mean that you give up ownership of all material goods and property. Filing a bankruptcy can help you with taxes and maintaining the ownership of your home and property. There are several methods used to file bankruptcy proceedings.
Many people either file a chapter 7 or 13 bankruptcy, but other bankruptcies are available. Filing a bankruptcy is restructuring debts through court, so you can pay for what you have or opting to give up everything to start over with a clean slate. It will depend on what you have in finances to pay all of the debt that you owed as to which procedure would best fit your needs. Always remember that filing can have severe negative results on your future credit for a number of years. Some bankruptcy filings require the borrower to attend credit-counseling classes.