If you default on your mortgage payments, your lender can repossess your home via court action. This process is known as foreclosing on the home. Once the lender has foreclosed on your home, it repossesses and resells the home to cover its loss. You no longer owe the debt, but the cost is the loss of your home and a negative credit rating. Thus, it's best to avoid foreclosure by selling the home or voluntarily giving it back to the lender.
Foreclosure Sale
If you default on your mortgage and don't make arrangements with your creditor to pay the arrears, the lender sells your home to recover its loss after the court orders a foreclosure. You no longer have to pay your debt at this point; however, you can no longer live in the home. In addition, if your lender forecloses on your property, it negatively affects your credit for at least seven years, according to Privacy Matters, making it difficult for you to get new credit, including a mortgage on another home.
Abandoning the Home
If you can't afford to pay your mortgage, you can voluntarily give up possession of the home rather than going through the foreclosure process. Contact your lender and inform it that you can't make your mortgage payments any longer and wish to turn the home back over to the lender. If you do this, you no longer owe any debt on the home. Voluntary repossession still appears as a repossession in your credit history; thus, it affects your credit similarly to if the bank repossessed your property, according to Bills.com.
Selling Home
If you can't afford to keep your home, you may be able to avoid foreclosure by selling the home. If you sell the home for more than your balance, you can pay off your lender; you then owe the lender nothing further and can walk away from the debt. If your sale doesn't pay off the loan, you may still owe money to the lender; certain lenders may forgive this amount of debt rather than go through foreclosure, according to MSNBC.
Warning
MSNBC says that it may be difficult to negotiate with your lender once you've gone into default. To avoid foreclosure, you may need to hire an attorney who specializes in real estate issues to negotiate on your behalf. If you can't afford an attorney, your state's legal aid society may be able to help you secure one for a low fee. In addition, the Department of Housing and Urban Development offers housing counseling during all stages of the foreclosure process; a housing counselor may be able to help you work out something with your lender before you lose your home.
0 comments:
Post a Comment