If you’ve fallen behind on mortgage payments and your lender is threatening foreclosure, don’t panic. You haven’t lost your house just yet, and there are several steps you can take to stall or prevent your home from being foreclosed upon. Here are a few worth thinking about:
- Refinance Your Mortgage. If you’ve fallen behind on your mortgage but still have sufficient equity, you can appeal to your lender to add your back payments to the remaining balance of your loan and agree to a longer amortization period. Although you’ll have to work hard in order to catch up on your payments, refinancing your mortgage is a good way to pay off your debts while keeping your credit intact.
- Appeal for Forbearance. Forbearance is an agreement between you and your lender that will stall your payments long enough for your finances to recover, on the condition that you’ll pay back your negative balance over time. If you can prove to your lender that your absent payments are a result of temporary financial struggles – such as illness or a lost job – and that these troubles will soon be over, the lender will often agree to forbearance instead of turning the matter into a legal issue.
- Short Sell Your House. If your lender refuses to renegotiate your mortgage and foreclosure seems imminent, you can still save your credit rating by short-selling your house. As we’ve previously discussed, a short sale involves listing your home on the market for less than what you owe your lender and then turning the proceeds over to the lender in exchange for debt forgiveness. While this means that you’ll lose your home, you’ll also be clear of debt and won’t be stuck with a foreclosure on your financial record.
- Declare Bankruptcy. If this seems like an extreme measure to take in order to avoid foreclosure, it is. However, if you’re looking for a way to stall for time until you figure out how to solve the financial mess you’re in, filing for bankruptcy will freeze your debts to your lender and prevent them from foreclosing on your home until a judge has reviewed the case – which can take months to do. Although declaring bankruptcy is only a temporary solution, it can provide you with a place to stay until you find a new home.
Losing your home through foreclosure is a tragedy that’s hard for anyone to recover from. If you’ve fallen behind on your mortgage, contact your lender immediately and appeal for a method of repayment that doesn’t involve losing your home. If your debts are too great to refinance your loan, you should use every available resource to avoid having a foreclosure appear on your record.
