In today’s economy more and more people are facing or worried about facing foreclosure. However, there are some options open to you that may help you avoid foreclosure or stop it in its tracks. These options are not typically promoted by mortgage companies, so few people know about them. And, while not all of these options may be available to you, it never hurts to ask about them.
Before You Are in Default
You have a lot more options before the bank files a notice of default. When you first experience hardship and are worried about making your payments you should contact your lender immediately. This could result in some much needed assistance that would help you avoid ever being in default on your mortgage.
Some lenders may give you time to make up your payments before they file for foreclosure. The amount of time that you are given may vary depending on the lender and your prior payment history. This is called a forbearance.
Another option is debt forgiveness. This is where the lender will actually forgive a portion of the debt, usually the missed payments. This is very rare, but is available to some home owners if they have a good history with the lender, good credit, and have qualifying extenuating circumstances.
A repayment plan may also be worked out with the lender. This is where you add a hundred dollars or some other amount to each of your payments for a certain length of time until you are caught up again. As long as you make the new payment each month from here on out, the lender will not file a notice of default.
Your loan may also qualify for a note modification. If you have an adjustable mortgage, the lender may freeze your interest rate or lower it to make your payments more manageable. They may also extend the amortization period on the loan. Alternatively, the missed payments can be added to the mortgage balance and rolled over into a new loan. This is a type of refinance.
Once your bank has filed a notice of default, your options become much more limited. About the only way to stop a foreclosure once it reaches this point is to sell your home. Typically you have a certain amount of time to pay the missed payments before the foreclosure becomes final. If you can sell your home for its market value in that amount of time, you can repay the loan to the bank in full to stop the foreclosure from getting on your credit, and potentially have some money left over to move into something else. Another option is a short sale, but your lender has to approve this action.