Importance of Avoiding Foreclosure

Rent to Own Edmonton

Importance of Avoiding Foreclosure

Wise borrower, who feels that he is about to default on a mortgage, will find any way possible to avoid foreclosure. Once a property is foreclosed, the lender repossesses the property and the homeowner has lost all his chances to gain his property back. If the property is foreclosed, the homeowner should forsake all claims he may have on his house in order to avoid being evicted by the court. A deficiency judgment may be initiated by the mortgage against the debtor if the property in question is worth less than the total amount he owes on his mortgage loan. Thus, he will bear the burden of additional amount. Both the foreclosure and the deficiency judgment will damage the credit history of the debtor in qualifying for credit in the future. It is best to avoid foreclosure if at all possible.

If the debtor cannot make his payment on time, he should call or write to the lender as soon as possible in order to explain the situation he is in and what his current financial status is. Based on these data, the lender may allow the borrower toavoid foreclosure by arranging a repayment plan or even providing for a temporary reduction or suspension of the payments. In order to persuade the lender to do this for him, the debtor must prove that he has recently experienced a reduction in income or an increase in living expenditure. If the debtor agrees to the terms of the new arrangement, the mortgage can be modified to refinance the debt and the mortgage can be extended. An affordable level of monthly payment may be available for him.

The lender may have to file a partial claim to bring the mortgage a more current status, which will lead the debtor to execute a promissory note or an interest fee, and a lien will be placed on the property until full payment is made. To avoid foreclosure, a pre-foreclosure sale can be done. The debtor can sell the property for an amount less than the amount due on the loan on the condition that the loan is at least two months delinquent. The debtor should sell the property within three to five months and the value of the property must meet government guidelines. If the alternatives mentioned do not work, the borrower, as a last resort, can voluntarily submit the lien on the property to the lender to avoid foreclosure. This will not save the property, but the homeowner’s credit rating won’t be damaged. A homeowner must also be aware of people that are likely to take advantage of him.