How to avoid foreclosure and stay in control of your finances
How to avoid foreclosure and stay in control of your finances
Foreclosure is the legal process that a lender initiates to get ownership of a mortgaged property wherein the loan payment is in arrears. Circumstances leading to foreclosure generally occur due to any unforeseen event which makes it difficult for the borrower to make regular monthly payments in the form of installments.
Checklist for home loan applicants
Before availing of a home loan it is advisable to take into consideration the long term obligations that come with the loan. Prudent borrowers often keep in mind the following factors before applying for a loan
Current and potential market rate of the property
Capital at disposal and required credit amount
Loan amount, tenure and rate that can be borne for at least five years
Means of repayment and reliability of income source
Current and near future living expenses and taxes
Assets to fall back on in case of unexpected expenses
Interest rates trend past, present and future
Negotiate for best results
Payment default can occur in spite of one's best planning. The reason could be a job loss, interest rate fluctuations, house repair or any unanticipated event that puts a strain on existing resources. In these situations its best to approach the lender and discuss the situation before the arrears go on increasing.
Banks and other financial institutions generally are willing to modify the loan payment if the borrower approaches them for negotiation instead of allowing the payments to default. This helps in postponing the filing of a Notice of Default which once issued limits the options of the borrower to negotiate.
Options to avoid foreclosure
Forbearance and special payment plans
A repayment plan is charted with a reduction in the monthly dues and increase in tenure with a lump sum payment. This process is known as forbearance and is a good option where a steady income is available. In case the dues owing are on the higher side, payment plans enable one to get back on track with a slight increase in installment and tenure, an option that can be utilized if one's financial situation starts improving.
Amortization, refinancing and partial claim
Banks also are willing to modify interest rates and amortization schedule where the credit score is good and earlier payments were regular. Amortization is the repayment schedule of the loan based on the interest and principal amount ratio in each installment.
If one has sizable equity in one's property then refinancing becomes a viable option wherein one acquires a second loan to pay off all outstanding dues and start afresh. Partial claim policy, applicable for certain kinds of loans, helps the property owner to get financial aid in the form of a one-time loan to cover missed payments. The loan is repaid after the original mortgage is cleared.
Short sale and deed-in-lieu of foreclosure
In situations where the property costs less than the mortgage, owners prefer to sell the property in a transaction known as a "short sale". Short sale proceedings require the lender's permission as well as certain conditions like apprised value to be at least 70% of the amount due, loan delinquency period to be of minimum 2 months and the property to be sold within a stated period.
As a last resort the owner can also voluntarily transfer deed of ownership to the lender and avoid foreclosure. The deed-in-lieu of foreclosure option however may not be suitable for all as the owner could be asked to repay the balance amount if the apprised cost of the home is less than the mortgage.
http://www.articlesbase.com/home-business-articles/how-to-avoid-foreclosure-and-stay-in-control-of-your-finances-2588648.html
Tastefully Simple - an unbiased review A review of Bartending Are Your Finances Prepared for Disasters? Air Purifier Reviews - Be Informed Ahead of Buying Lean cuisine Review- Lean cuisine mushroom and spinach pizza Improve Your Life, Set Goals, Work Harder, Make More Money, YOU Can Do It! Satellite Link Budget Calculator-Satellite Link Budget Tool Disney World Savings Guide Reviews -find out some ways to make Disney World savings Launch Jacking Review - Why Didn't I Think Of That? Take Control and Master Your Finances Gfx-1 Coupon Discount and Review Men made easy reviews Ultimate Footer Popup Ad Coupon Discount and Review