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11 Moves In Your Play Book When Facing Foreclosure
Contrary to what many Hollywood movies make up believe, lenders are not natural blood-suckers who cannot wait to take you to court and humiliate you by locking up your front door. It would actually serve a lender’s best interest if a deal can be struck with a defaulter to repay what is owed. Foreclosure proceedings is often the last resort any lender wants to enforce. They are costly, time consuming, is bad publicity, and most importantly, it makes people homeless.
If you are falling behind on your payments, don’t take it as a shameful embarrassment. Things happen. It is just one of those challenges in life where you have to overcome and rise above. Even billionaires can face these challenges. More often than not, borrowers will know way beforehand that they are going to default. If you fall into these situations, you should definitely speak to your bank before you officially do so. They might be able to structure a special arrangement so that everything is kept in order.
And when the reality is that you are facing foreclosure, here are your 11 options.
1) Borrow from family and friends and reinstate the loan. This is usually the best option as it keeps your head above water for as long as you need to get back on the boat. Often times, financial setbacks are temporary and you just need a payment timeout to get your stuff in order. The bad part of this is that you could destroy friendships and kinships if you fail to repay them. You would also be the subject of interest in family dinners and social gatherings.
2) Hold back the foreclosure by negotiating for a forbearance. If you can demonstrate that your financial problems are temporary and the rainbow to the clouds are forthcoming, a lender could be more than willing to structure something for you. There are 3 key points to present to the lender. Your loss of income is involuntary, the equity you have in the house, and how you realistically expect things to turn around financially.
3) Selling the property is also a straight forward solution especially when the proceeds can more than cover the outstanding mortgage. Instead of letting a lender sell it to the highest bidder in an auction, why not sell it at a market price instead. The key point in this course of action is that you must identify your predicament early so that you have the time to do what has to be done on the real estate marketplace without harassment.
4) Consolidate by refinancing. This can work out just right if you have considerable equity in your home. Again, it would be best if you can identify your future problem early. Because by the time you default, your credit score might affect your ability to get a cash out equity loan approved. This means you have to do it before any mortgage defaults to avoid complications.
5) Negotiate for a settlement. A settlement with a lender means that a sum has been agreed to repay your debt. The debt will not be repaid in full but you will be released from the liability once you repay the agreed settlement amount. You can then raise the money from friends or just sell the house at a competitive price. Do take note that settlements adversely affects your credit record even through you have “repaid” the debt.
6) Find an investor. If your home is desirable, an investor could already be in the wings waiting for an opportunity. Do you know that a number of property players flip a property by profiting just a few thousand dollars from each flip? So in effect, this means that if you can find an investor you can trust, he might be willing to quickly buy the property and offer it back to you on a lease-option agreement. You must of course offer such players some benefits.
7) Check whether you qualify for foreclosure relief programs. Yes the government is sympathetic to home owners. The loss of homes can become a big social problem if the authorities do not lend a helping hand. The problems can compound quickly when mass foreclosures are happening at the same time. It would serve everyone’s benefit to assist home owners facing foreclosure.
8) Get a second mortgage to reinstate the first one. This is a costly option. By now you would already be falling behind on payments. The only lenders you can turn to are private. They can be more flexible on terms. But expect to pay much more on interest charges. You will also end up with 2 mortgages.
9) File for bankruptcy. By doing this you are basically submitting to your fate. The only real advantage it does is in giving you more time. You will still lose your home in the end.
10) Rent out the property. Desperate times calls for desperate measures. To continue paying for your monthly payments, you can get someone else to make those payments for you. Rent out to tenants and use the rental collections to repay the bank. Rental rates are usually enough to cover mortgage payments. In the meantime, go live with your mother-in-law or go rent a much cheaper apartment.
11) Be obnoxious. This is pretty much the type of stuff that a loser would do. If you do nothing, the inevitable will happen. And you would go down without a fight. How would you face your family by dropping like a bowling pin?
Take note that in some places, there is a redemption period after foreclosure that provides you more time to take appropriate action on solving your own problems. So it might not be over even when the fat lady sings.