The following are the most common options to explore when a foreclosure is coming. Your best solution depends upon your individual circumstances. Short Sales, Loan Modifications and Deeds-in-Lieu should be a last resort.
- Deeding the property back to the bank (Deed-in-Lieu)
- Agreeing to a loan modification
- Taking in roomers
- Moving out and renting your home
- Listing with a traditional real estate agent
- Selling the property yourself
- Filing bankruptcy for relief from liability
- Borrowing more money to catch up
- Doing nothing and allowing the foreclosure to occur
Should I Keep My Loan or Just Sell My Home?
Did you know? Very few loan modifications include principal balance reductions.
We see many homeowners wrestle with the decision of whether to somehow cure or reinstate their current loan, even though the loan balance may be far higher than what their home is currently worth, or to simply sell their home.
A key issue we always discuss is sustainability. Even if you can re-negotiate your loan with your lenders and get some immediate relief or for a period of time, how realistic is it that you will be able to sustain making the payments and eventually return to a stable financial footing?
When you can get a fair loan modification from your lender you can get the much-needed breathing room to get back on track and finally make those payments affordable again. However, most loan modifications provide for a reduced interest rate or a re-amortization into a longer term but typically do not cut for the total amount owed. The reality is that your lender almost always will eventually want to collect all the money they were originally owed.
Keep in mind that even if you can work out a reasonable loan forbearance or modification with your lender, it may take years before the market value of your home recovers to make that decision worthwhile to you and you gain an equity position in your home. Many homeowners on grasping these issues realize that such forbearances and loan modifications may not be a financially prudent choice.
As part of this decision to keep your loan or sell, if you expect you will need to move in the near future and you are “upside down” – owing more than its worth – you will either need to bring money to the closing to pay off your lenders in full or do a short sale.
