How to Avoid Foreclosure

For many people buying a home is the dream of their life and when they sign the papers to become a homeowner, the last thing on their mind is that one day they might lose the home because of inability to pay the mortgage. Unfortunately, inability to pay a mortgage is not that uncommon and even if you know the main reasons for foreclosure, you can’t always prevent it. On the other hand, banks are not interested in becoming real estate brokers – i.e. in selling your home half-price – but they prefer to get their money instead. That is why very often banks will be tolerant to your missed payments but of course, you can’t and shouldn’t rely on that.

The inability to pay your mortgage does not lead to foreclosure right away and even if you have missed not one but a couple of payments, not everything is lost. Banks are willing to negotiate with you and for them foreclosure is as undesired as for you. So, when you know that you will have difficulties with making your mortgage payments, don’t wait till the bank files a Notice of Default, because then you have less ways to react, but contact them instead. Here are some initiatives you can take in order to avoid foreclosure:

• Communicate with your bank. Getting polite letters from the bank that you are late on your mortgage is not pleasant but you have to face it. Don’t ignore these letters but call your bank instead and try to see what can be done. The earlier your react, the better.

• Get more time to pay your payments. Sometimes banks are willing to reschedule your payments and they can offer you a repayment plan, which is more convenient for you. This procedure is called forbearance and unless you are a serial non-payer, many banks will offer you this.

• Create a repayment plan. Sometimes, when you feel that you will not be able to meet your monthly payments in the long-term, you might be eligible for a repayment plan, which lowers your monthly payments but extends the period of your mortgage.

• Apply for debt forgiveness. Debt forgiveness, as the name implies, means that the bank will waive your unpaid installments. However, have in mind that not many banks will agree to debt forgiveness.

• Refinance your mortgage. If you have other assets, you can mortgage them too in order to get a second loan, which you can use to pay your first mortgage. Banks prefer to refinance you than to go in foreclosure.

• Search government support. If you have no other assets you can mortgage, one more way to avoid foreclosure is to search for government support. There are special government programs you can apply for, which can grant you another loan (most likely with a lower interest rate) you can use to pay your mortgage and avoid foreclosure. However, have in mind that even if you are approved for such a loan, the whole procedure could take a long time and in between the bank might become impatient.

As you see, there are many ways in which you can avoid foreclosure. Even if the foreclosure procedure has already started, still not everything is lost and you can make a lot to avoid losing your home. However, it is crucial that you react as fast as possible because this really increases your chance to avoid foreclosure.