Exploring Your Alternatives to Foreclosure

There are many alternatives to foreclosure, but few homeowners know how to take advantage of such options.  This is one of the biggest reasons a lot of people lose their homes when they are unable to pay their mortgages on time. So, if you really do not want to experience home foreclosure, you need to start looking for options that will allow you to keep your home or at least to make money from the present equity of your property that you can use to pay off your debts.

Options that Retain Your Home Ownership

1. Mortgage Loan Refinancing

Among the alternatives to foreclosure, this one is the most ideal for people who have been making payments to their mortgages for over 10 years. Under this option, you can seek refinancing on the equity of your home and use the proceeds to repay your remaining mortgage. This can substantially reduce your monthly loan payments, especially if the interest rate applicable to your refinancing loan is lower than the one applied to your existing mortgage.

2. Repayment Plan

If you have been unable to pay your loan for a few months, you can talk with your loan provider and come up with a way to settle the delinquent amounts that will be easy and affordable for you. However, this option is ideal only for individuals who still have the financial capacity to pay monthly amortizations plus additional charges for delinquent amounts.

3. Mortgage Modification

You can ask for loan modification from your lender if you think that you will have a hard time paying off your debt because your household income has declined. You can negotiate for longer payment periods, smaller monthly payments or even lower interest rates.

4. Special Forbearance Plan

You can consider a special forbearance plan as one of your alternatives to foreclosure if you think that you will be unable to make regular mortgage payments due to sickness, temporary disability or other emergencies. This option will result in the temporary suspension or reduction of your monthly mortgage payments. However, be prepared to pay higher monthly payments in the future to cover the delinquent amounts.

Options that Dispose of Your Home and Avert Foreclosure

1. Home Sale

Some people immediately put up their homes for sale at the first sign of financial troubles. Just make sure that the sale amount of your home is enough to settle your loan and provide you with extra cash for renting or putting the down payment on a smaller home.

2. Short Sale


A short sale is one of the alternatives to foreclosure that can end up in huge losses for the seller. Homeowners who resort to short sales are in a hurry to sell their homes, so they sell their properties at very low prices. Sometimes, the proceeds of a short sale are not enough to settle the home mortgage.

3. Deed in Lieu of Foreclosure

If foreclosure is imminent and you have already run out of alternatives, the next best thing to do is surrender to the lender the deed to your home. Also called friendly foreclosure, this option will ensure that no further damage will happen to your credit score.

 

 

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