Alternatives to Foreclosure
Sept. 12, 2024
You must’ve heard the phrase, “My home is my castle.” And that’s exactly what it feels like, especially considering that your home is likely the largest investment you have ever made in your life.
If you are like two-thirds of American adults (according to data by The Federal Reserve Board), you used a mortgage loan to finance the purchase of your home. While taking out a mortgage means you can live comfortably in your home, it also means you must follow the lender’s terms and make payments on time. If you don’t, you are facing the risk of foreclosure, which is when the lender repossesses the home.
However, no one can possibly predict what’s going to happen to them a year, five years, or 10 years from the date they take out a mortgage. You could experience financial hardship caused by a loss of employment or an unexpected illness that leaves you struggling to keep up with your mortgage payments. That could happen to anyone. But does it mean you cannot avoid foreclosure? Not necessarily.
The mere thought of foreclosure is enough to lose sleep over. Fortunately, foreclosure doesn’t have to be your only option. If you are concerned about making your mortgage payments or have already missed a payment or two (or more), Attorney Herbert K. Ryder can help. The Somerville foreclosure attorney at Law Offices of Herbert K. Ryder LLC helps people struggling with debt save their homes by pursuing alternatives to foreclosure.
What Are the Alternatives to Foreclosure When You Get Behind On Mortgage Payments?
If you have been served with a foreclosure action or otherwise warned by your lender that you could lose your home, the first thing you should do is reach out to the lender. This lets the lender know that you want to find a solution just as much as they do and also lays the groundwork for amicable negotiations. During your conversation with the lender, they may outline the alternatives to foreclosure that you may be able to choose from.
While the options proposed by your lender may be a starting point, you should explore all possible alternatives, including:
Refinance: If you agree to refinance, you will have to take out a new loan to pay off the existing mortgage. This can prevent foreclosure proceedings and won’t hurt your credit score. The downside? The new loan could have higher interest rates rise, which means you could end up paying more each month than you are now.
Repayment plan: Alternatively, you may be able to work out a repayment plan with your lender. This plan will require you to pay slightly more than your regular mortgage payments in order to get you all caught up. The downside? With those extra payments, you may end up in a tougher financial situation than you are now.
Forbearance: If you endured a temporary hardship (e.g., due to a sudden illness), you may be able to get forbearance, which will put your mortgage payments on hold until your situation improves. The downside? Your mortgage payments will most likely increase after the forbearance period ends.
Modification: As the name implies, you could negotiate changes to the terms of your mortgage loan. For example, if your lender agrees, you could spread your payments over a longer period to lower the monthly payment amount. The downside? The lender may want a higher interest rate to make the modification worth their while.
Partial claim: You may be eligible for an interest-free loan from the Department for Housing and Urban Development (HUD), which is known as a partial claim loan. Essentially, it’s a second loan on the home in an amount necessary to bring your mortgage loan payments current. The downside? You will still be required to repay that partial claim loan.
Short sale: A short sale, when approved by the lender, allows you to sell the house for less the amount owed on your mortgage. The downside? A short sale will still negatively impact your credit score, not to mention that the amount you sell for won't be enough to cover the full amount of the mortgage.
Deed in lieu of foreclosure: In this alternative to foreclosure, you’re voluntarily turning over ownership of your home to the lender in exchange for the lender’s agreement not to pursue deficiency judgment. The downside? Obviously, it’s the loss of your property.
Bankruptcy: If you are struggling with debt and facing foreclosure, it may make sense to consider filing for bankruptcy. Your bankruptcy filing triggers an automatic stay and stops all creditor actions, including foreclosure. While bankruptcy won’t result in the discharge of your mortgage debt (it’s a secured loan), it can help you get back on track financially and afford monthly payments. The downside? Bankruptcy can lower your credit score.
When you know your options, you can avoid foreclosure. Not sure which option is best in your particular situation? You might want to consult with a foreclosure attorney.
Facing Foreclosure? Find Out What Your Alternatives Are
Receiving warnings of foreclosure on your home can be frustrating. When you’re facing foreclosure, you can feel helpless and hopeless. But know this: hope is not lost yet. You haven’t made all those mortgage payments on your loan just to lose your home to the bank now. Attorney Herbert K. Ryder from Law Offices of Herbert K. Ryder LLC helps people facing foreclosure remain in their homes by employing a variety of methods. Everyone’s circumstances are unique, which is why what works for one borrower may not work for another. To continue the discussion about alternatives to foreclosure tailored to your specific situation, consider scheduling a free consultation with Attorney Herbert K. Ryder.