Weigh in on Your Options
Foreclosure Solutions
We all know how it goes. A
difficult situation comes along, and the natural instinct of "fight
or flight" kicks in. However, with a decision involving something
as important as your home, there are essential ramifications and
consequences with any of those decisions that
must be
considered. That is why it is essential you look at all the options
and decide which is the best for you.
Here are some of the most common options when struggling to meet
your financial obligations regarding your mortgage:
Reinstatement
You may be able to come to an agreement with
your lender to pay the total amount owed by a specific date in exchange for the
lender agreeing not to foreclose.
Pro: You are out of the red once you pay back what you are late on.
Con: Your back payments could be a very large sum, and if you are facing
foreclosure or in financial difficulty, it is unlikely you will have
that lump sum to pay your lender.
Forbearance
A forbearance agreement is an agreement with
your lender to pay back the amount you owe over a period of time, rather
than all at once. This is more of a short-term solution for
temporary, not long-term, financial difficulties.
Pro: Gives you more time to market and sell
your home.
Con: You need to have the extra income to make
extra payments each month. If you can't make the payments, you're
back where you started and you could get more behind on other payments.
Loan Modification
The lender may agree to change the terms of the original loan to
make the payments more affordable. For example, missed payments can
be added to the existing loan balance, the interest rate may be
modified, or the loan term extended. This is a long-term
solution.
Pro: Lower interested rates, meaning your
monthly mortgage payment is less.
Con: This is a very long process, and there is
no guarantee your lender will agree.
Refinance
If the lender will not agree to a loan workout
or modification, you may be able to refinance the loan with another lender.
Pro:
Con:
Deed-in-Lieu of Foreclosure
The lender may allow a homeowner to "give
back" the property. The lender in turn sells the property to get back
part or all of the loan balance.
Pro: You are completely out from under your
home with no more mortgage obligations.
Con: This has a big impact on your credit
score, dropping it around 250 points. It also stays on your credit
for 7 years.
Short Sale
If a homeowner owes more on their property than it is currently
worth, then you can hire a qualified real estate agent to market and
sell your property through a negotiation process known as a short
sale. Call (602) 569-2233 for more information on short sales.
Pro: Once again, you no longer have mortgage
obligations and can begin to get financially stabilized again.
There are also fewer effects to your credit score than with a
foreclosure.
Con: There is still some damage to your
credit, and the IRS may treat your forgiven debt as taxable income.
