It’s not something people want to think about, but the economic situation makes it necessary to know the ways to stop a foreclosure. Below are some steps you can take to avoid it.
Speak to the Lender
The worst thing you can do is ignore the facts or avoid the issue. You’ll just end up with the Notice of Default and things will probably get worse from there. If you can’t make the payments, tell the lender. The moment you realize you can’t pay, seek out a workable solution. Don’t wait for that notice to come.
If you approach the lender early and explain your circumstances (i.e., lost your job, illness etc) he / she might be more sympathetic. If you run away or ignore the demand letters, you’ll just make things worse.
One of the best ways to stop a foreclosure is to be honest about it. Trying to hide from your obligation will result in legal action.
Ask the lender for some extra time to pay up. Talk with the lender and arrange for a repayment plan. This is termed forbearance. You and the lender can work out a compromise deal.
If you’re lucky, the lender might waive the missed payment if you’re able to pay up the next time. This is called debt forgiveness, and consider yourself blessed if the lender agrees to this.
Make the Payments in Installments
This is one of the most effective ways to stop a foreclosure. Suppose your monthly rent is $2,000. You can tell the lender you’ll add an extra $100 (or whatever you can afford) to the succeeding monthly payments until you make up the missed payment. This helps prevent the debt from increasing without busting your monthly budget.
Change the Rates
Another way to prevent foreclosure is by using new rates. If the mortgage agreement uses variable rates, the lender can opt to freeze it for a certain period. The lender can also help you by prolonging the amortization period. This process is known as note modification.
Also an effective way to stop a foreclosure is by refinancing. This can be done in a variety of ways. If you have enough equity, the lender can add the back payments to your loan balance. This will result in a new amortization. This is possible only if you have the right equity.
Loan from Government Agencies
Certain government institutions will allow you to borrow money at low interest. This will allow you to make the payments. Your eligibility will depend on the criteria set down by the agency.
Again it’s best if you have everything worked out with your lender before the Notice of Default arrives. When this notice arrives it means the foreclosure has begun and it will be quite difficult to stop. Most of the time, only a reinstatement of your loan will end the proceeding. This will cost money.
There are many ways to stop a foreclosure. What’s important is that you take stock of all the options and decide which is best for you.