6 Alternatives to Foreclosure
Foreclosure is a term that’s plagued with financial and social stigma and it brings to mind struggle, irresponsibility and loss. But though it has this stigma, many don’t realize that foreclosure could really happen to anyone. Anything from an unexpected loss in the family to prolonged unemployment, or even a sudden illness could lead to a financial situation that leaves people struggling to keep their homes.
As if a foreclosure wasn’t bad enough, it can also wreak havoc on a homeowner’s credit score, making for an ugly financial situation. The good news is that there are often alternatives that can be considered. Here are six alternatives to foreclosure:
Talk to Your Lender about Loan Modification
As with most bills, a lot of financial situations could be remedied by simply being honest with you lender. If you have missed payments and trouble paying, talk to your lender about loan modification. Though you must qualify depending on their standards, a loan modification could mean a lower interest rate, a longer amount of time to pay, and of course lower payments.
Rent Out a Room or the Property
It seems like an obvious action to take, but it’s an alternative that’s often overlooked. If a homeowner is having trouble paying the mortgage, it may be worthwhile to make use of extra space in the home and rent out a room to a tenant. If this isn’t possible, it may be worthwhile to rent out the entire property – this way, most of the mortgage gets covered while the homeowner seeks a more affordable place to live.
If you have a good or even passable credit rating and enough equity in the home, refinancing is a good option to at least look into. Refinancing can bring with it a better rate, no matter how slight, and in turn bring more affordable payments.
Also known as a payment plan, forbearance is an arrangement that allows you to work out a temporary payment plan with your lender. It’s also known as a hardship program – in these cases, the payments may be lowered or stopped altogether to allow a homeowner to catch up.
A “friendly foreclosure” is just another term for a process called a “deed-in-lieu.” It’s fairly straightforward on paper: rather than allow the bank to foreclosure a home, you would return the deed of the home on your own volition.
The most common route taken by those facing foreclosure, a short sale is just that: selling the house for less than what is owed under approved parameters to get out of paying more than the home is worth. The impact to you credit is still there, but can be significantly lower than foreclosure and friendly foreclosure.
While these options may seem overwhelming, you can obtain information from and put your trust in experienced attorneys. At Brenner Spiller & Archer, LLP, our attorneys work with foreclosure alternatives and can make the process as smooth as possible. We are committed to helping people struggling with debt avoid foreclosure in Central and South Jersey. Contact our New Jersey attorneys online or call 856-963-5000 to schedule a free initial consultation to discuss your situation today.