When you buy our home we have a lot dreams. You think about decorating it, about protecting it and feel immense pride in owning it. But if you have to lose our homes to foreclosure, it is going to be extremely disheartening. But many a times it so happens that you cannot afford to pay back the mortgage you have on your home any more. This is when your lender acquires the right to foreclose your home and take it into his possession.
Foreclosure is the legal act of gaining ownership over your house by your lender when you are unable to pay back the loan amount you have on your home. What is alarming is that the number of foreclosure is growing rapidly. Foreclosure is a serious threat that you have every option to fight. But you need to have the will to avoid foreclosure.
The first thing to do in order to avoid foreclosure would be to prevent a Notice of Default which lenders usually file in case you cannot pay back the loan amount. The moment you realize that you are having difficulty with your loan, contact your lender. Do not shy away or ignore notifications from your lenders. Ask your lender to modify your loan. Lenders are not in favor of foreclosures. They would rather save their interest. This means that they may offer some kind of loan modification solutions to you like:
• Offer you more time to pay back your loan: Your lender may want to wait for you to pay back the loan amount before he can take any legal actions against you. This is the act of forbearance where you get the opportunity to work something out and pay back the loan and avoid foreclosure.
• Waive a payment: If you come to an agreement with your lender, he might waive off a payment or two to avoid foreclosure if you can convince him that the rest of the payment will be paid in time and regularly. This kind of an agreement happens only very rarely.
• Opt for a longer payment period: If you can stretch the period of your loan payment, you might have to pay a more money than what you actually owe, but the installments can be lower and affordable.
• Changing terms of payment: Your lender might freeze the interest rate on your loan before it increases if it is an adjustable loan. Your lender might also change the interest to an amount that will be affordable by you.
• Refinance: If you meet the lender’s guidelines and have enough equity, you might be given the opportunity to increase your loan balance. This provision is made so that you can include the back payments and repay the loan and avoid foreclosure.
• Opt for a separate loan: There is a process of partial claim where certain loans offered by the government for borrowers who meet certain criteria, to apply for a separate loan with which you can pay back the missed payments.
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Samantha Taylor is a contributing Financial Writer, Moderator and Community Mentor of MortgageFit. She has been an active participant in the forums wherein she offers mortgage advice and suggestions to people in loan problems. If you have a query on "how much house can I afford", "ways to avoid foreclosure" and related issues, you can simply discuss it with her in the Mortgage Forum.
