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Last year, the United States saw an uprise in home foreclosures due to the COVID-19 pandemic. In just September 2021, over 10,000 U.S. properties began the foreclosure process. This number was up 106% from a year before.
There are defense mechanisms that can help you prevent foreclosure and stay in your home. The safest way to do this is by talking to your lender.
Keep reading to learn how to prevent foreclosure in four different ways.
1. Reinstate Your Home Loan
By reinstating your loan, you will be able to make up missed payments, including ones with added interest, fees, and other expenses.
Your state’s laws will offer you a specific amount of time to reinstate your loan. However, some states don’t allow you the right to reinstate.
If this is the case in your state, check with your mortgage and deed of trust as some provide this right within the agreement. Lenders would often rather reinstate your home loan than deal with foreclosure.
Your loan servicer will know how long you have to reinstate your loan.
2. Work Out a Forbearance Agreement
Talk with your lender about entering into a forbearance agreement. This involves the lender permitting you to make reduced mortgage payments, sometimes no payments at all, for some time.
A forbearance agreement generally lasts between three and six months. Yet, if your situation is urgent enough, the lender might lengthen your timeframe.
You can qualify for a forbearance agreement if you cannot currently make payments but can prove to the lender that you can make payments in the future.
Once the forbearance agreement ends, you’ll have to go back to paying the regular amount plus fees to pay down the missed payments. You can sometimes pay the missed amounts in a lump sum or through a repayment plan.
3. Loan Modification
Loan modification refers to the agreement between the lender and the borrower where the lender adjusts the loan terms. To prevent foreclosure, ask your lender if this is a possibility.
A modification is the best way to prevent foreclosure because it can involve any of the following:
- Interest rate reduction
- Adding overdue amounts to the loan balance
- Extending the term of the loan
Foreclosure prevention using this method might also include the lender setting aside part of the unpaid balance as a principal forbearance that won’t accrue interest.
Knowing how to prevent foreclosure involves knowing about refinancing. You can refinance your old loan and start new.
You can redeem your mortgage through refinancing up until the time of the foreclosure sale. To stop foreclosure at the last minute, you can use 1800SellNow to buy your house even if you owe money.
Ways to Prevent Foreclosure That Work
Your first line of defense to prevent foreclosure on your home is to try to work something out with your lender. Generally, lenders prefer working with you rather than dealing with a foreclosure.
Ask your lender about reinstating your home loan, entering a forbearance agreement, modifying your loan, or refinancing. If these tips don’t work, work with a foreclosure prevention attorney or sell your home outright.
Exhaust all possible options before giving up your house. For more real estate articles, check out the other posts on our blog.