Is Foreclosure Right Around the Corner Because You Can’t Keep up With Payments? Read This!

What is Foreclosure?

Imagine you’re back in fifth grade. While going to the park with your friends, you see one of your neighbors setting up a garage sale. Among the selection of items, you notice a cool-looking hat at the steal price of one dollar! Because you didn’t have some money on you at that time, you borrow a dollar from one of your friends.

Days pass, and you forget to return your buddy’s dollar. While eating in the lunch hall, your repo-friend comes along and takes the cap away from you, never to return it again, unless you’re willing to pay more to get it back.

It’s quite similar to foreclosures. When you sign up for a mortgage, you’re basically promising to pay the lender back based on their terms. Whatever you do that is outside those terms breaks the promise you made. This breach of trust gives power to the lender to take back what is theirs (the house). Obviously, in the real world, the lender isn’t going snatch your home right away, since late fees and delinquencies are a thing that give more breathing space before the seemingly inevitable catastrophe of foreclosure comes around to bite you.

But you’ve seen the title already. Sometimes we just can’t keep up with what life throws at us. And in this case, when it rains, it pours! If you don’t meet your end of the deal, you start getting penalties, fees, and a hit on your credit score! But to some of us, the hardest thing is seeing us and our families move out of the home you’ve worked hard to keep.

What if expenses are starting to go overboard and you just can’t keep up with the payments? What do you do?

Knowledge is Key 

First, calm down and assess the situation. Don’t be afraid to look at the notices sent over to you. Some of them will have information trying to help you find ways to handle the situation.

Next, understand your mortgage. Different lenders have different specifics that could determine which step you’ll be taking next. For example, if you’re considering to refinance the property (which will be discussed later), some types of mortgages would require you to pay a few extra thousand dollars.

Lastly, know the foreclosure process specific to your area. Some might require the lender to file a lawsuit before the foreclosure proceedings, but others don’t. Get some help from a foreclosure attorney so you could get sound advice.

Knowledge is power. Having the right understanding of your circumstances can help you gauge how much time you have left to find ways to address the problem.

Now, what are those other steps?

Communicate with Your Lender

If you’ll take some time to put yourselves in the shoes of the lender, you don’t want this to be happening as well. Foreclosure takes a lot of time and money to do. So, most lenders would appreciate it if you’d talk to them and figure something out instead. Both of you would be better off being willing to help each other to get solid footing rather than crossing swords.

Here are some things that your lender might offer. Should they not offer these potential solutions, you can try to confirm with them just in case.

1. Refinancing. This means that the lenders give you an entirely new loan with better terms and lower interest rates. If the issue is that you need the payments to be a little lower every month for you to be in the clear, then this can help you get a fresh start.
2. Repayment Plan. If the lender is kind enough, you two would agree to pay an amount that works for you over a longer period of time, but also including late payments.
3. Forbearance. Temporarily suspend your monthly payments by asking for a forbearance. At the end of the suspension, the payments will resume and there’s a cumulative amount (depending on the length of the suspension) that you have to pay. This helps you buy time if the issue you have is not going to be too long, like finding a new job or paying up for unexpected medical expenses. Don’t go for this option if you already know that you can no longer afford the home in the first place.
4. Loan Modification. The existing loan will be adjusted to make things easier for you. This is similar to refinancing wherein the interest rates, monthly repayments, or loan terms are changed to your benefit.

File for Bankruptcy

If somehow you and your lender are unable to get into an agreement, this is one of the things you can do. Filing for bankruptcy, also known as Chapter 13, may allow you to keep your house, or even a mortgaged car that you otherwise would have to surrender should you choose to do nothing. You will be allowed to pay for your debt for a span of three to five years using your future income, taking a huge load off your shoulders.

While that sounds good and all, a negative mark is going to be left on your credit report for ten years which might make it hard for you to get credit, find a job, or set up life insurance. It’s up to you to decide if a fresh start like this is worth the hassles of its disadvantages. Again, we would recommend that you talk with an attorney to get into the details. Do take note that most people generally consider this as one of the last-resort options. But there must be something better than this, right?

Can’t Deal with This Anymore?

Short selling might be the answer for you if you still can’t make ends meet even with better terms. It might be a better option for you to get over this hump by just “removing” the problem in one go.

Short selling means that you’re selling the property so you can pay the lender upfront. Usually, the price is lower than your balance, but that might be better for the lender than having to go through the foreclosure process, repossess the property, have it up for sale, and find someone willing to buy it.

There are plenty more other ways to deal with this issue, like signing a deed in lieu of foreclosure! If you’re lost and need more information, we’ve got you covered! Shorefront Investments has been doing this for years and we’re happy to be able to get you the assistance you might need. How? It’s easy! You can give us a call at (850) 713-4866, send us an email, or fill a form on our front page!