As the homeowner, it’s commonsense to feel devastated facing the reality of being burdened by a distressed financial condition but there come several options that can help you in moving through these rough times. Often the result of a sudden job loss, medical expenses or an economic downturn, many homeowners suddenly find themselves in precarious financial worlds. Knowing what your options to solve are will give you power to make the best decision for your life. Below we examine some of what is available to distressed homeowners.
1. Loan Modification
If you can’t make your mortgage payments, a loan modification may be an option for you. A loan modification is when the terms of your mortgage are changed to help you pay less. It could mean reducing interest rate, increasing loan term, even adjusting principal amount owed. Once this is done, lenders are more willing than not to help homeowners avoid foreclosure and many will do so. This has to be considered the first step.
2. Refinancing
If you choose to refinance your mortgage, you’re trading your current loan for something new . If you’re unable to lower your interest rate through refinancing, you can refinance your loan to one with less manageable terms. Refinancing can lower the financial burden if your financial distress is derived from high monthly payments.
3. Forbearance
Forbearance is a movement towards a pause of your mortgage payments. It can be a good temporary answer for homeowners who find themselves in an unforeseen dilemma, like losing a job or becoming sick. While forbearance doesn’t erase your debt, it’s like a breather to help you get over it and come up with your next move, without having the foreclosure looming over your head.
4. Short Sale
A short sale may even be an option if you owe more on your home than it’s worth. A short sale is where your lender agrees to let you sell the house for less than the amount you owed on the mortgage. This doesn’t let you keep your home, but it could help you from losing it (to foreclosure) and also keep damage to your credit score to less than you might have if you hadn’t tried to hang on at all.
5. Deed in Lieu of Foreclosure
A deed in lieu of foreclosure is a situation in which, rather than going through court, you allow the lender to keep your home without a lengthy foreclosure proceeding instead. The upside to this option is that you’ll avoid foreclosure — all the legalese that goes with it — but you won’t be keeping the property.
The truth is that financial hardship can place an undo number of homeowners in a precarious place, but with knowledge of your options, you are able to do your best for yourself and your investment. Even with loan modification, forbearance or a short sale it is possible to navigate this difficult situation without ending up in foreclosure. If you have your financial advisor or housing counselor, always consult.
The fear of losing their homes due to financial difficulty often stems from the inability to meet monthly payments. However, staying informed about available options can help protect homeowners from this outcome. Loan modification, forbearance, and short sales are all potential solutions to avoid foreclosure. Consulting a financial planner or housing counselor is crucial to determine the best approach for your specific situation.
Visit Gold Homes LLC for more blogs, expert insights, and guidance.