If you missed several mortgage payments, you’re probably wondering, how can you stop a foreclosure when you don’t have the money to pay your mortgage arrears? Losing one’s home can be worrying, but there are ways to mitigate your losses.
When you miss a mortgage payment, you have to analyze your financial situation and see whether the inability to pay is temporary or more long-term.
When you want to stop a foreclosure, you have to evaluate your options based on two choices: not losing your home and losing your home.
Options that involve not giving up your home
Everyone’s first option is not to lose their home. When you miss mortgage payments, the first thing to do is to talk to the lender to see what your options are. You may be able to have your loan reinstated, modify your loan terms, or get a period of forbearance. In these cases, the lender is not obligated to agree to any of your proposals but may choose to accept to stop foreclosure. You can also choose to refinance with a different lender or file for bankruptcy.
The easiest way to stop a foreclosure is to pay all mortgage arrears, including any assessed late penalties and fees, by a certain date. When you become up to date with your payments, the lender will restore your mortgage and reinstate your loan. Thereafter, you can continue making your regular payments on the mortgage.
When loan reinstatement is not an option because you don’t have the money to pay off your mortgage arrears, talking to your lender about modifying the terms of your loan may stop a foreclosure. Loan modification may entail requesting for a lower interest rate, changing the interest rate from adjustable to fixed so you can you have a more predictable monthly payment, or extending the term of your loan so that you can have a lower monthly payment.
Another option to stop foreclosure when you don’t have the funds to currently pay for the mortgage arrears is to request for a forbearance. In this case, the lender agrees to reduce or suspend monthly payments for a particular period of time, i.e., six months. After this period, you begin your regular mortgage payments plus the missed payments spread out over a period.
Refinance with another lender
When you refinance your mortgage with another lender, you take out another loan from another lender and use the proceeds of that loan to entirely pay off your current loan. A new lender, however, will not refinance your loan if you have missed a lot of mortgage payments and have bad credit. For this reason, choose this option at the earliest possible time.
Filing for bankruptcy
Filing for bankruptcy before foreclosure proceedings are instituted can stay the foreclosure because once you file a bankruptcy petition, the court issues an automatic stay on attempts to collect your debts. A Chapter 7 bankruptcy petition, however, will not discharge the mortgage debt because the mortgage debt is secured by your house. Your other debts, on the other hand, such as credit card debts and medical bills, may be discharged which could free up some of your funds that can be used to pay your mortgage.
Options that involve giving up your home
Some options to stop a foreclosure may involve losing your home. Usually, you can just transfer it to the lender in a deed in lieu of foreclosure or sell it to a third party and use the proceeds to pay off the mortgage debt. When the amount of mortgage debt is higher than the value of the property, it’s important to negotiate with the lender to waive any right to a deficiency judgment. A deficiency judgment allows the lender to collect the difference between the debt and the fair market value of the home or the sale price (whichever is higher) from you, the debtor.
Deed in lieu of foreclosure
To stop a foreclosure, you can deed your home to the lender in a deed in lieu of foreclosure. In this case, the lender agrees to accept your house as full satisfaction of your debt. Make sure the agreement states that the lender agrees that you will no longer owe any debt and that the lender waives any right to a deficiency judgment.
Sell the house
If you can sell your house before a notice of lis pendens is annotated, you might be able to get a better price for your home. Otherwise, you can sell your house to a third party in a short sale and negotiate with your lender to waive the right to a deficiency judgment if the sale price is lower than the mortgage debt.
Learning how to stop a foreclosure entails a review of your current financial situation to figure out the best possible option. If the lender has already initiated a foreclosure complaint against you, you can speak with a foreclosure attorney to see your options on how you can delay the proceedings to give you enough time to pay off the mortgage debt.
SIf you are facing a foreclosure, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at email@example.com.