If you are behind on your mortgage, or know you cannot make your payments, you need to start looking at your options right away. There are several ways that you may be able to avoid losing your home.
Negotiate with Your Lender
As horrible as foreclosure is for you, it’s not ideal for lenders either. Try talking to your lender about options. You’ll need to explain why you fell behind on your payments and how you will be able to make your payments in the future. Your lender may be open to one of the following options to avoid foreclosure:
- Forbearance – the lender agrees to hold off on foreclosure for a certain amount of time, and to suspend or lower your payments during that time period. You agree to get current and resume full payments at the end of the forbearance period. This is good if you are behind due to a short-term financial crisis which will improve soon.
- Repayment plan – if you have fallen behind due to short-term financial problems, but are now back on your feet, a repayment plan may work for you. You’ll have to make larger payments for an agreed-upon length of time to bring the mortgage payments current.
- Loan modification – loan modification changes your loan terms so that your monthly payments are smaller. It is a long-term solution. In most cases, the term of the loan is lengthened, and/or the interest rate lowered. You will need to prove financial hardship and you may be required to pass a trial period in which you make the new, smaller payments on time before the changes are permanent.
Refinancing is another long-term solution. Like loan modification, the goal is lower monthly payments. You’ll get a new mortgage to pay off and replace your old mortgage. You’re looking for a lower interest rate and possibly longer repayment period.
Reinstatement is an expensive way to go, but if your financial crisis is over, it may be right for you. You must pay off your entire default amount and the expenses incurred by your lender as a result of the default, in one payment. Some states have laws that provide this option, some mortgages have wording that allow it, and if neither applies to you, your lender may be willing to do it anyway.
To learn more about alternative to foreclosure and how you can keep your home, please contact an experienced foreclosure attorney right away.