Foreclosures can be frightening and stressful for homeowners. But they’re not unbeatable, let alone unstoppable. In fact, you can learn how to stop a foreclosure using several viable techniques and strategies right now.
Today, let’s break down some of those methods one by one.
A foreclosure proceeding is a legal process in which your mortgage lender retakes possession of your home after you default on your monthly mortgage payments. When they foreclose your home, they will put it up for auction and attempt to sell the home to recoup the costs remaining on the mortgage loan.
Foreclosures can be lengthy legal processes, they can cost lenders quite a lot of money, and they don’t always result in lenders recovering the full cost of the mortgage.
Because of this, lenders will typically work with homeowners to avoid or stop foreclosure and help homeowners get back on track to making regular monthly payments. Here are seven ways you can stop foreclosures and even potentially keep possession of your home.
Naturally, you can first try to make extra mortgage payments to avoid defaulting on your loan for three to six months (which is the usual time frame after which lenders will file for foreclosure with a local court).
For example, if you missed three months’ worth of mortgage payments and received notice of default, you can speak to your lender and try to make one extra mortgage payment per month over the next three months. By the time six months have passed since your first missed payment, you will have caught up on your mortgage and will no longer be in default.
When you do this or try any of the other strategies below, of course, you need to speak to your lender immediately and negotiate with them. Call or email them and work out a repayment plan. If your lender knows that you are trying to repay your debt, they will be less likely to try to foreclose your home quickly after you default. Be aware that this will require additional funds and your lender may not stop the foreclosure until all delinquent amounts are paid.
Balance Homes offers a unique and innovative way to retain control of your home and pay off your debt at the same time, through a home equity co-investment. The best part is there's no minimum credit score to qualify.
It works through co-investing. In a nutshell, Balance Homes will pay off your mortgage and pay you cash for your home's equity so that you can consolidate debt and improve your finances. Once this is done, you can make regular occupancy payments and have the option to purchase more of your home’s equity over a period of time while your finances improve.
Balance has no minimum term, so you can sell or refinance your home into a traditional mortgage at any time, within the 7 year term.
Co-investing with Balance Homes is an affordable, flexible way to own your home, prevent foreclosure, and get back on track. You can contact us today for more information or if you have any questions.
A traditional refinance may also be a loan modification option depending on the flexibility of your lender. When you refinance your home, you take out an additional mortgage or personal loan and use the funds to pay off the original mortgage contract, including any additional expenses or late fees.
Then you make payments on the new loan, which will hopefully have a better interest rate or more promising terms. Depending on your relationship with your lender, your bank or credit union may even refinance your home for you to allow you to keep your home and continue making regular payments.
Some lenders do this if their homeowners or borrowers have a good payment history and recently came into a tough financial situation through no fault of their own. Alternatively, you can contact other banks or credit unions for a potential refinance offer. You’ll have a better likelihood of receiving a refinance offer if you have a good credit score and a good payment history over most of your mortgage.
Mortgage forbearance is a special allowance for borrowers who experience temporary financial strain. For example, say that you lose your job after becoming injured and have to pay exorbitant medical bills. These put a huge strain on your finances, making it difficult or impossible for you to pay your mortgage payments for roughly six months to a year.
You can then apply for forbearance from your lender. If they provide it, you'll be expected to get back on your financial feet and save up money to make regular monthly payments. The trick with forbearance is that you also have to pay whatever money accrues during the forbearance timeframe.
Say that you request forbearance for three months. When the fourth-month deadline rolls around, you'll owe that month's mortgage payment plus three months' worth of mortgage payments all at once. Because of this, you'll need to save aggressively and make sure you have a lump sum ready to go when your first non-forbearance mortgage payment is due.
Although this can be difficult for some homeowners, requesting a forbearance could be the best choice if your financial hardship is only temporary. If you apply for a mortgage forbearance, you need to prove that the hardship is temporary to convince your lender that the forbearance will not last forever.
The federal government offers several programs to help homeowners get through times of financial strife. For example, the Department of Housing and Urban Development offers housing counseling agencies if you’re facing foreclosure. They may be able to provide you with a new mortgage loan backed by the federal government, help you pay off your debt, and more.
A homeowner can propose a short sale with their lender. During a short sale, the home is sold for less than the remaining balance on a mortgage. The lender recovers some or most of the owed debt and may let the borrower off the hook.
Note that your lender has to approve a short sale before you can make one. Most lenders will agree if less than half of the mortgage’s amount is remaining.
You should also keep in mind that your lender may also require you to pay off any of the mortgage balance that is not covered by the short sale's profits, if any remain. In this case, you could still wind up paying off your mortgage without even living in the property for months or years to come.
Lastly, you can sign a deed in lieu of foreclosure. A deed in lieu of foreclosure has you voluntarily transfer the title and ownership of your property to your bank or another lender. In exchange, the lender releases you from any other mortgage obligations.
The advantage for the lender is that they acquire the property almost instantaneously. This means they don’t have to go through the process of applying for foreclosure through the courts, holding an auction to sell the property, and so on. The borrower is advantaged because they can escape from any remaining debt from the mortgage.
However, only some lenders will accept a deed in lieu of foreclosure, and even then, they’ll only accept it if you don’t have too much left on your mortgage. Again, you should contact your lender and ask about your options to see how they can work with you to avoid the foreclosure process.
Foreclosure can be stressful and challenging to prevent, but homeowners do have options to stop the process. If your lender isn’t willing to work with you on loss mitigation options, Balance Homes may be able to help.
In fact, we specialize in helping homeowners stay in their homes and avoid foreclosure through our unique co-investing process. With Balance, you can rebuild your finances, avoid a major hit on your credit score, avoid foreclosure, and continue living in and owning your home. Contact us today and see how we can help you.