We don’t have to tell you how the crash of the housing market has impacted the national economy and more importantly impacted so many families here in South Florida. This single event has wreaked havoc and stress throughout the State and placed people in the terrible position of fearing the loss of their largest asset – their homes.
For too many homeowners this crisis has left them with many more questions than answers as to what their options are. Some believe that foreclosure is the only way out of their predicament, but the truth is that foreclosure is one of the most devastating financial challenges that any family may have to deal with, and it’s actually one that with proper assistance can often be avoided.
Listed below are 10 possible options other than foreclosure including the Advantage and Disadvantage of each option. Armed with this information you will be better prepared to meet with your lender and discuss what is best for you and at the same time, be acceptable to the lender.
Please keep in mind that the information below is in summary form and may not fully explain or present all of the solutions available to homeowners facing the prospect of a foreclosure. We would like to help you understand which option may be best for you. For a free evaluation of your situation and to learn which options may be available to you to help you avoid losing your home –
Call us today at 561-843-6057.
- SELL YOUR PROPERTY
If you have sufficient equity in your property, contact a qualified real estate agent who also understands the foreclosure process and discuss listing your home for sale.
ADVANTAGE: Selling allows you to avoid foreclosure and retain a portion of your equity.
DISADVANTAGE: Unfortunately too many homeowners in today’s market do not have adequate equity remaining in their property to allow them to set a competitive price that allows them to retain any of their equity.
- RENT YOUR PROPERTY
If as a homeowner, you have a mortgage payment that is low enough that current market rates for renting your home in your area will allow you to collect enough rent to pay the mortgage, you might consider converting your property to a rental, and using the rental income to pay the mortgage.
ADVANTAGE: Renting permits you to retain your property indefinitely or sell at a later date.
DISADVANTAGE: Being a landlord has its own problems of upkeep, renting to responsible tenants, and the potential that rental rates may be insufficient to pay the combined costs of the mortgage and the costs of rental maintenance.
- REFINANCE YOUR PROPERTY
If you have sufficient equity in your home and have retained a solid credit rating, it may be possible for you to refinance your mortgage.
ADVANTAGE: In today’s market interest rates are lower which may result in lower payments.
DISADVANTAGE: Depending on the mortgage amount you wish to refinance, it’s also possible that your mortgage payment may increase, and you have the expensive of closing costs.
- MORTGAGE MODIFICATION
Modification of your mortgage means taking one of the following actions: reducing the interest rate on the loan; reducing the principal balance of the loan; modifying the term length of the loan or any combination of those three loan factors. By reducing one or more of those loan elements, you should see a reduction in your monthly payments and a more affordable mortgage.
ADVANTAGE: Reduces the amount of the monthly payment you are required to make and may reduce the principal balance of the loan.
DISADVANTAGE: Mortgage Modification requires that you requalify for the loan under the new payment terms. More paperwork is necessary, and usually the lender, your mortgage holder has to be actively pursuing one or more of these loan modifications.
- REINSTATEMENT
If you’re looking to avoid foreclosure, reinstatement is the easiest way to do so, assuming you have the necessary cash to bring your delinquent account current. All you have to do is contact the mortgage company to determine the total amount you owe in arrears to date and pay that amount in full up to the day before the final foreclosure sale. Doing this will reinstate your mortgage and stop the foreclosure proceedings.
ADVANTAGE: Reinstatement does not require the mortgage company or lender’s approval.
DISADVANTAGE: You must be financially able to pay all back payments, fines, and fees due as of the date you are requesting reinstatement.
- FORBEARANCE OR REPAYMENT PLAN
To establish a repayment plan for past due mortgage payments you are required to negotiate with your mortgage company to establish the time period for the repayment of the past due amount. This payment is usually made in addition to the current mortgage payment.
ADVANTAGE: Allows you to make back payments over an agreed upon, extended time period.
DISADVANTAGE: Requires that you be in a financial position to pay both the current mortgage amount and the agreed upon monthly payment for money owed. In some cases, the mortgage company may require you to financially qualify to be approved for forbearance of the debt.
- SERVICE MEMBERS RELIEF ACT (Active Military Personnel Only)
If you’re both a homeowner and an active member of the military and are experiencing financial difficulty directly related to your deployment and you can show that your mortgage debt was incurred prior to deployment, you may qualify for relief under the Service Members Civil Relief Act. You’ll need to contact the American Bar Association and research which local attorneys are willing to work with service members who qualifying for this type of financial relief.
ADVANTAGE: If you qualify under the Service Members Civil Relief Act, you can arrange to reduce the payments you make on your mortgage and on all your consumer debts.
DISADVANTAGE: You must be active military to qualify, and you’re required to find an attorney who will work on your behalf.
- DEED IN LIEU OF FORECLOSURE
This document is also referred to as a “friendly foreclosure” as it allows you, the homeowner to give the property back to the lender instead of going through the foreclosure process. A Deed In Lieu requires lender approval and that you vacate the property. A Deed In Lieu of Foreclosure can only be done with properties with only a primary mortgage and no second mortgage loan.
ADVANTAGE: With some successful Deed In Lieu of Foreclosure transactions, a lender will forego their right to file a deficiency judgment against you.
DISADVANTAGE: You must vacate your property and the home may be reported to credit agencies as a foreclosure. This approach is not available for properties with second loans.
- BANKRUPTCY
Bankruptcy is generally undertaken to eliminate overwhelming personal debts. However, if those debts and payments cause you to cease paying your mortgage, personal bankruptcy may be a viable solution to eliminate those debts including your mortgage, but will not stop the bank from foreclosing if you do not meet your mortgage obligation.
ADVANTAGE: Bankruptcy does not require lender approval.
DISADVANTAGE: If you cannot meet your mortgage payment obligation, a personal bankruptcy will slow but not stop the foreclosure process. Bankruptcy can be costly and severely impacts your credit worthiness for as long as 7-years.
- SHORT SALE
If you owe more on your home property than it is currently worth, you may hire a qualified real estate agent to market and sell that property. The short sale process involves a negotiation with your lender asking the lender to accept a lower amount of money than is owed to pay the mortgage in full. This agreed upon price becomes the price that is your realtor will sell your home for to satisfy the short sale contract. A short sale requires you to meet financial hardship standards set by the lender in order to qualify, and cannot be defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Some examples of hardships that are acceptable to most lenders include: a mortgage payment increase due to an adjustable rate change, loss of your job, divorce, excessive personal debt, and unplanned relocation to name a few of the most common.
ADVANTAGE: A short sale allows you to avoid foreclosure and salvage a portion of your existing current credit rating. A short sale is not required to be part of your individual public record. In many cases, you will be able to avoid a deficiency judgment and you may qualify for another mortgage in as few as 24 months as compared to the 5-7 years for a property foreclosure.
DISADVANTAGE: Short sales are often complex and difficult. You can make the process easier by contracting with a qualified real estate agent working with an attorney-back company to assist you with the many steps and heavy paperwork requirements needed in a short sale.
Steven Presson is an expert in short sales. Working with him, as you attorney-backed agent can assure you of the best possible outcome when selecting a short sale of your property.
Call Steven Presson today at 561-843-6057 to get your questions answered and to begin the process that is the best solution for you in order to avoid foreclosure. |
