Tactics and Options to Stop Foreclosure Quick
With interest rates having risen markedly in recent years, and with billions of dollars in ARMS adjusting upward over the next couple of years, many people now want to know how to stop a foreclosure.
When the ARMS reset, millions of people are finding their monthly payments going through the roof and they simply can’t afford the new payments.
Your tactics for how to stop foreclosure quick will depend on if you have much equity or if you don’t, and how far along you are in the foreclosure process.
Your options will vary for each case. Suffice it to say that the earlier you are in the foreclosure process, the more options you have.
How to Stop a Foreclosure: Options to Consider
You may be able to refinance your loan. If you have a fair amount of equity, you can try this to lower your monthly payments and spread them out over a longer period of time. However, this doesn’t do you any good if you simply don’t have the income to make these lower payments or have the money to do the refinance.
Forbearance with the Bank: if you are still in the beginning stages of a foreclosure, you should contact your lender right away and try to work out forbearance with them. Here’s how it may work: let’s say you are behind on your mortgage payments for 3 months and your monthly payment is $1,000 a month. So that is $3,000 you are behind. If you can resume making your monthly payments but cannot pay the $3,000 you are behind, the bank may allow you to, say, pay $1,300 a month, with $300 of that going toward what you have defaulted on. This means that in 10 months, you’ll be current again.
This forbearance strategy generally only works to stop a foreclosure quick if you had lost your job, which created the impending foreclosure hardship, and now you’ve found a new job….in short, if you are bringing in income again that will make the bank believe working out forbearance with you will be in their interest.
Bankruptcy: Some people who want to know how to stop a foreclosure turn to bankruptcy. We are not attorneys, so this is not legal advice, just our opinion. But bankruptcy in our view should be an option of last resort. First, it is an action that will follow you around for years, leaving your credit shattered. Secondly, unlike what many people believe, filing a bankruptcy will not allow you to keep your home in the long run anyway. Lastly, it costs quite a bit of money…money that may be better spent paying off your defaulted mortgage loan.
Short Sales: This option is an increasingly popular way to stop foreclosure quick. A short sale is when the bank agrees to sell the defaulted mortgage at a discount. However, you as the homeowner will not be able to short sale the property since the bank will make it mandatory that you can’t profit from defaulting on the payments. Usually it will have to be you working in conjunction with a real estate investor who will negotiate with the bank to buy your mortgage note at a discount.
There is no guarantee the short sale will work, but if the investor can present a compelling case to the bank, they may accept it. Short sales are done all the time these days. You will benefit in that your home, if the bank accepts the short sale, will not go to foreclosure….therefore you will not have your credit ruined due to the foreclosure.
How to Stop a Foreclosure with a Lease Option
Lease options are another great way to stop foreclosure quick.
A lease option is also known as a rent to own. This is when you get a tenant-buyer into your home as quickly as possible to take over your mortgage payments. The tenant-buyer will have an option to purchase your home as well. The option term is usually 12 to 24 months.
Of course, you’ll have to move out of your home, but you get to avoid the foreclosure and the subsequent destruction to your credit and the humiliation of having your home auctioned off at the sheriff’s sale.
Working with real estate investors on a lease option also helps because time is critical when you are facing foreclosure. Real estate investors have connections and marketing expertise and may be able to get you a tenant-buyer for your home quickly, and set up the contracts properly.