How To Avoid Foreclosure

How To Avoid Foreclosure

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foreclosureYour home is your safety haven and a place you love coming to after a busy day at work. Everything’s going smooth and things are just the way they’re supposed to be. However, ‘life’, as we endearingly call it, tends to give us surprises that sometimes makes us quake in our boots. If you come to think of it, foreclosure is something that can create havoc in our lives. We all dread it since it has very serious consequences. And that’s why your house is a place that should never be taken for granted when it comes to paying mortgage.

The truth is, no one is immune from a sudden financial dip. But what happens when you’re confronted with a situation where you can’t pay the mortgage? We often hear stories about how someone lost his/her job and was forced into foreclosure. Thinking about something like that happening to us or our loved ones sends shivers down our spines. However, nothing is lost until the last minute. Let’s look at some ways of avoiding foreclosure and see what needs to be done if life throws a curveball at you.

Spend Wisely

Do you really need that designer jacket or do you have to eat out every day for lunch? You might think that by curbing the desire for a good jacket and rationing what goes down your throat won’t prevent your house from going into foreclosure. Maybe it won’t, but keeping a check on your daily expenses can help you save quite a lot each month. Think about what’s truly essential for you or your home in terms of money. Whatever is not important can wait until you get back on your feet financially. You can opt for some eco-friendly commodities for your home or sell some furniture if you no longer use it. It’s not necessary to have an iPhone 6 when you can get a 4S for a much cheaper price. The whole point is to understand finance and take ownership for your actions. This is life and you will experience road-blocks at some point. The essential thing here is to prioritize the way you spend and you’ll see a positive difference for yourself.

Talk To Your Lender

Your lender is a human being and should understand your situation if you have a genuine problem. Tell him or her about why you defaulted on your payments in the last couple of months. Not many people are aware of this but, your lenders want to help out. If you don’t pay on time, that becomes their loss as well. Ducking and diving will only worsen the situation, and the next thing you see is an envelope in your letter box that’s come from the bank in the form of a legal action. Thus, it is better to come clean about the mess you are in. Being upfront with your lender smooths the situation out rather than sweeping it under the rug. Send an email and be honest. If you’ve always been punctual with your payments and you’ve encountered a serious cash problem just this time, your lender will be lenient with you. Apart from that, there are programs like mortgage refinancing that can fix your condition depending on where you stand in terms of money.

Put Your Home Up For A Short Sale

As bitter as it sounds, you may need to let go of the house you love so much. There’s something known as a pre-foreclosure sale, also called a short sale. Short sales take place when your lender lets you sell the house at a lower price. You may be able to use that money to clear debts you owe to your lender as well as the bank. Not everybody approves of this option, but short sales have been a saving grace and many individuals have avoided foreclosure. Since the economy took a hit with the 2009 recession, property rates keeps fluctuating.  People who are on the verge of a foreclosure choose to go for short sales as that gives them a clean slate. You need to speak to the bank first when you’re contemplating a short sale for your house since banks go into huge losses if your home goes into foreclosure.

Time For Deed-In-Lieu

If every attempt of yours has failed miserably, then it’s better to go for deed-in-lieu. Over here, you hand over the house to the person it belongs to. This doesn’t seem very promising but it releases you of the obligations on that mortgage. And what’s more, you don’t have your name in the list of people who are responsible for foreclosure. Imagine what this does to your credit score along with getting an allowance from the Government to sustain for a few weeks. Deed-in-lieu needs to be taken into consideration only when you’ve run out of all options. Losing a house to foreclosure can be heart-breaking but if you’re smart with the way you handle your finances, chances are you might never come close to a situation like foreclosure.

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