How can you protect your home from foreclosure?
Having your house go into foreclosure is a financial disaster, but there are ways to avoid this if you are determined to save your house. A foreclosure can have long-lasting effects on your credit score, but just because you've missed a payment or you're about to miss a payment, you don't have to hand over your keys to the bank. Look into these options before your home goes into foreclosure
Negotiate Directly with the Bank
As soon as you miss a payment or are about to miss a payment, call your lender. Practically every bank has a department dedicated to helping people with their mortgage when they hit hard times. In order for them to help, however, you have to let them know you're having problems as soon as possible. If it's your first missed payment, many banks will be willing to work with you. It is possible to have a payment delayed and/or missed payments added to the end of the loan.
It should be noted, however, that most banks are only willing to work with people who have short-term problems. If you missed a payment because of a one-time unexpected expense, the bank can probably help. If you're anticipating long-term problems, such as being unable to afford mortgage payments because of a job loss, you will need to find another solution.
Refinance Your Loan
If you are unable to afford your current payment and you have equity in your home, refinancing the loan might be a good option. By refinancing, you can reduce your interest rate and stretch out your payments over a longer period of time. This means a smaller mortgage payment every month. While there are fees involved with this process, many people who need to reduce their bills have successfully avoided foreclosure by refinancing.
Of course, if your home does not have any equity, refinancing becomes a lot trickier. While it used to be impossible to refinance a mortgage without at least 25% equity in a home, today a government program called HARP is backing new mortgages for properties with little or negative equity. There are different versions of this program, but it is important to note that there is help both for people who have not missed any mortgage payments and those who have missed payments.
In order to explore these options, start by calling your bank. Banks are able to guide you through the process, whether you're choosing a standard refinance or working through a government program such as HARP.
Sell the House
If the home cannot be refinanced so that the payments become affordable to you, it's time to consider selling the house. While this might seem like losing the home, controlling the sale is a much better solution than letting the bank take the home away. Start by calling a realtor and finding out what the value of your house is. If you owe less than what it is worth, you can sell it directly through a realtor on your own.
If you owe more than the home is worth, however, selling the house will become more difficult. In order to sell without owing money to the bank, you'll need to go through the short sale process. In this case, a house is sold for its current market value, and the bank agrees to not pursue the difference between this amount and the amount owed. This can be a good way to find a buyer for the home without ruining your credit with a foreclosure. The bank usually agrees to these deals because they prefer the much simpler process of a short sale to the long, drawn out and expensive process of a foreclosure.
If you're in danger of missing your mortgage payments, the most important thing to do is to deal with the problem quickly and directly. The more payments you miss, the fewer options you'll have to avoid foreclosure.
To find your local bank's details in order to ask them for more information about foreclosure negotiation and options please click on your location here.