No one wants to get the bold red print in their mortgage bill that threatens foreclosure if payments aren’t made immediately. The prospect of losing your family home is terrifying and can make you feel like you’re financially cornered. With the economy over the last decade, you’re definitely not the only one making these hard decisions.
Many people haven’t been able to recover from job losses and the highs and lows of the housing market in recent years, and foreclosure has become much more common than it used to be. Home owners aren’t the only ones to blame sometimes. Several mortgage companies have been found guilty of predatory lending practices that created ever-climbing interest rates and forced insurance choices.
So, what can you do when you get that final notice? Fortunately, you have more options than you think—especially if you’re still employed and willing to make a lot of calls.
Decide Whether or Not to Fight It
There are certain instances when it’s just not worth fighting the foreclosure, including:
- Uncertain Financial Future: If you’ve lost your job permanently and have no hope of finding gainful employment anytime soon, then you won’t have the resources to even arrange for a payment plan. Making promises that you know you can’t keep will only prolong the process and put you further in debt.
- Divorce or Legal Separation: A failed marriage or relationship usually means that one party will be leaving the home permanently. Many couples choose to sell the marital home and to split the profits, or one partner may retain the property. Unfortunately, there are times when one spouse gets stuck holding the bag. Being responsible for a mortgage payment with half the income can make keeping your house impossible. Depending on how far behind payments are, selling may no longer be an option. In this case, it’s important to talk to an attorney about sharing the bill.
- Health Problems: This is an unfortunate circumstance, but one that happens more often than it should. If a person is diagnosed with a terminal illness or experiences an accident that ends in severe disability, they may lose access to their income. Medical bills can add up and being unable to work indefinitely can make keeping the home impractical. A short sale or returning the home to the bank might be feasible due to the nature of the situation.
- Being Unable to Maintain the Home: We all know how expensive replacing a roof or a home’s foundation can be. Homeowner’s insurance doesn’t always cover necessary upkeep and having poor credit can mean a lack of resources. If the home has become unlivable or unsafe and you aren’t able to make any repairs in the foreseeable future, it might be a good idea to sell or look at alternatives.
Making the right decision is something that needs to be based on personal experiences and your future financial prospects. Don’t hang on to a home that you can’t afford.
Contact Your Lender and Communicate Your Intentions
Ghosting, or ignoring, your mortgage company will only make things worse. The best way to prevent foreclosure is to be proactive from the very beginning. If you call your lender the first time you know a payment will be missed or late, there’s a good chance they’ll work with you. It generally depends on whether or not your financial hardship is temporary or a more long-term situation.
Missing a payment due to an emergency means that you still have a steady income and can make a payment arrangement. Losing your job or looking at felony prison time would present a very different scenario. Being honest with your mortgage company and preparing a letter of hardship can help you explore potential solutions.
If you do plan on allowing the home to go into foreclosure because you’ve run out of options, let your lender know. They may offer an alternative or stop accumulating fees if allowed to take possession quickly. Just not paying can end up in legal action and having you lose more money.
Pool Your Money
It can help to talk to a financial advisor who can give you some perspective on your available assets. There are times when things look a lot worse than they are, and you may have enough material assets to sell to keep your home. This isn’t a good idea unless you have a way to continue making money, and the missed payments are due to some sort of emergency.
You can also consider taking out a small loan to cover the missed mortgage payments if the financial issues that led to the missed payments are resolved. It’s important to think carefully before incurring more debt, though
Find Alternative Options
When you’re facing foreclosure, you need to research and read more about the things you can do to save your home or to stop financial repercussions. Have a backup plan ready to go should you lose your home and end up being legally forced to leave. This is why it’s important to decide whether or not you’re going to try and stop the foreclosure process.
Look for rental options or family members that will allow you to stay with them on short notice. Throwing good money after bad will only make your losses worse and give you less to work with if you need to move. It can be an emotionally draining situation, but it’s something that you have to deal with in order to avoid homelessness.
Is Bankruptcy an Option?
Bankruptcy should only be an absolute last resort. It has lasting implications on your credit and can offset your tax returns for the upcoming year. But, it can get you out from under your mortgage debt if you run out of alternatives. There are different types of bankruptcy, and some will allow you to retain some of your property with partial payments.
Ultimately, this needs to be a well-informed decision made with the help of professionals. No one wants to lose their home, but you need to be realistic and prepared for every possible outcome.