A foreclosing entity has the power to take one’s home and sell it for a predefined sum of money. Mortgage companies and creditors often use foreclosures to get out of debt, remove homes from the market, or otherwise make up for losses.
With mortgage delinquencies at their highest levels, homeowners increasingly see their homes repossessed by banks and other creditors. Knowing your options and how to protect yourself best is important if you face foreclosure. Find some of the most effective ways to keep your home from being repossessed.
1. Refinance Your Home
One of the most effective ways to stop foreclosure is to refinance your home. A refinance is when the homeowner obtains a new loan from a different lender at better terms. In most instances, the lender will allow the homeowner to avoid foreclosure as long as they can meet the new mortgage payments.
This strategy is also more effective than bankruptcy because it allows you to keep your home and pay off your debts over time without losing the equity in your property. In addition, refinancing your home allows you to extend your mortgage term, providing you with a more stable monthly payment. That way, you will have the cash flow to pay off other debts causing you financial hardship.
2. Work Out a Repayment Plan with Your Lender
Another effective way to stop foreclosure is negotiating a repayment plan with your lender. During this process, you and your lender agree on how much money will be paid toward outstanding debts each month. This can vary in the percentage of the outstanding balance to monthly payments equal to the borrower’s monthly income.
The plan aims to get ahead of your bills to avoid future delinquencies and foreclosures. In addition, the plan should establish an affordable payment structure that allows you to pay off debts over time.
Under certain circumstances, you may also be able to obtain a loan modification from your lender. This is when your lender agrees to make additional borrowing available to give you the ability to pay off debts and keep your home.
To get a loan modification, speak with your lender about what this means for your payments and what it will take for them to approve the request. Having this plan in place before the foreclosure sale, you can quickly stop foreclosure and save yourself thousands of dollars throughout the process.
3. Hire an Attorney
Seeking legal advice if you’re facing foreclosure and want to keep your house is also an effective way to stop the process. The attorney can review the documents filed by your lender and determine whether you have legal grounds to avoid foreclosure or bankruptcy. The attorney may also help you negotiate a repayment plan with your lender and look for other alternatives to prevent foreclosure.
If you don’t think you have legal grounds to stop foreclosure, it may be best to seek advice from an attorney before going through this legal process. This could save you money in court fees, time, and other costs associated with foreclosures. Foreclosure defense attorneys will also explain the process to you, help prepare the best defenses, and even represent you in court if needed.
4. Consider Selling Your House
Sometimes it’s possible to avoid foreclosure with a short sale when a lender agrees to sell your home for less than the amount owed on the mortgage. A short sale requires that you agree to sell your home for a predetermined sum of money and close escrow immediately. If you decide to take this route, look for agents to help you determine whether your home is worth more or less than what you owe.
5. Re-evaluate Your Budget
If you’re considering a repayment plan with your lender, consider shrinking the spending in your budget. Cutting back expenses gives you the cash flow needed to pay off debts and stop foreclosure. Reviewing your budget will also help you determine where cuts can be made with little impact on your lifestyle.
Be sure to cut back on unnecessary expenses first before trimming necessities. For example, consider cutting cable or phone bills instead of cutting back on buying groceries. This will help you stay on track with making payments without affecting your family’s needs.
Conclusion
Losing your home can be an emotionally and financially devastating experience. However, finding an effective way to avoid foreclosure and a sustainable way to keep your house is essential. Don’t let your financial hardships prevent you from taking steps to stop foreclosure and protect your home. Find the right strategies that work for you and make them happen.
