Foreclosure Alternatives

02/01/2011

foreclosure alternativesBuying a home is a huge investment. It takes a large chunk out of all your financial resources. And the cost doesn’t end with your down payment. You need to contend with your monthly payments and on your mortgage. This is a situation that you’re going to live with for many years, unless you can get the loan paid off.

But what would happen if you got behind on the mortgage payments? And delays on your payments can reap some serious consequences on your financial situation. If you are delinquent, and it gets to the point of being severe, there’s a possibility your home could be foreclosed on. Foreclosure means you property would be repossessed by you lending institution who owns your mortgage.

Fortunately for you, even if you’ve defaulted on payments, it doesn’t mean you property will be immediately foreclosed on. You have some alternatives to foreclosure that can help you out. And they are:

  • You can have a private sale. This is a great option to avoid foreclosure. You can sell your home privately and pay off what you owe to your lender. It helps you to get whatever equity you’ve accumulated in your home. A private sale is usually done with the sale amount being more than what is owed on your mortgage.
  • Paying off the amount that you’re delinquent. Most of the time the lending institutions will be required to accept any payment you make toward delinquency, and to re-instate your loan. These delinquent payments you are paying might also include a few legal fees, especially if the foreclosure process has already been started. There are also lending institutions who require you to have certified funds before your loan can be re-instated.
  • You will go through forbearance and then repayment. One common way of resolving your delinquency is working out a new plan with the lending institution. You should be able to pay part of the delinquency each month, over and above the regular monthly payments. If your situation is such that you aren’t able to make these monthly payments, then the lender can opt for extending you a ‘forbearance’ that suspends the payments over a specific period of time until you can start back onto your repayment schedule.
  • Then you have the re-amortization option. With a re-amortization, your delinquent mortgage amount gets added to your loan balance, to help you bring your mortgage pay back up to date. This move will increase not just the total amount of your loan, but the monthly payment as well. But the increase won’t be a big if the life of your loan gets extended.

Most of the alternatives listed here ‘assume’ that you’ll have the ability to pay the mortgage payments at some time. But there’s a particular foreclosure alternative known as a ‘loss mitigation’ alternative. This program was established by the federal government and the mortgage industry for stopping foreclosures. With this program you’re given some options that can assist you with keeping the home, even if you don’t have the ability to pay the mortgage payments. These programs make it much easier for you to handle the problem of foreclosure.

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