An Overview of Common Foreclosure Prevention Options
Going through a foreclosure is a devastating experience that can ruin your credit rating. Fortunately, there are a few measures you can use to stop foreclosure if you act fast enough. The following are some of these tips.
Renegotiate the Mortgage
Most lenders would rather have you keep the house and pay your loan instead of repossessing the house. Therefore, you may be able to renegotiate your mortgage and agree to new repayment terms with your lawyer. Your chances of success depend on various factors such as the outstanding loan, how far behind you are with the loan, and your current finances. It doesn't hurt to try.
Refinance the Loan
Another option is to refinance the loan. Some people mistake mortgage refinancing with mortgage renegotiation, but the two are different. In renegotiation, you maintain the same mortgage but negotiate new terms (such as interest rates or repayment terms). In refinancing, you get a new mortgage and use it to repay the existing one in full. You then start repaying your new mortgage.
Ask For Forbearance
Mortgage forbearance is a temporary pause in mortgage repayments. Forbearance may work if you are facing a temporary hitch in cash flow, but you are confident in getting back to your feet financially in the short term. A lender may grant you a forbearance if you have the documents to back up your claim of expected return to normalcy.
Sell the Home
The above options allow you to stop the foreclosure and keep the home. However, if you just want to stop the foreclosure and don't care about keeping the property, then you can also decide to put it up for sale. You risk a short sale, however, where you sell the home for less than you owe on it. A short sale is not such a terrible idea, however, since it allows you to preserve your credit rating (that wouldn't be the case with a foreclosure).
File For Bankruptcy
Lastly, it is also possible to stop a foreclosure by filing for bankruptcy. This is because foreclosure is a debt collection strategy, and all debt collection actions stop when bankruptcy is filed. Whether or not you get to keep your home depends on the bankruptcy chapter you file. Chapter 7 bankruptcy will only stop the foreclosure temporarily while Chapter 13 may allow you to keep your home if the circumstances are right.
A foreclosure process can move fairly fast, so you shouldn't hesitate if you want to avoid the disaster. Consult a real estate lawyer to help you figure out which of these options, or any other, is the best fit for your circumstances.
For any further questions on real estate law, contact a lawyer.