Other Foreclosure Alternatives
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Other Foreclosure Alternatives
If working with your mortgage lender doesn’t pan out for you, and if the available government programs for homeowners don’t apply to you, you have few options left, short of winning the lottery and paying off your mortgage once and for all. There are some alternatives you can consider, though they may sound drastic.
Things To Know
- You could hand over your deed to the lender.
- You could file for bankruptcy.
- You might consider selling the home.
Hand the deed to the lender
An option called a deed in lieu of foreclosure allows you to hand the deed to your home over to the lender in exchange for the lender canceling the debt. The lender will not report it as a foreclosure on your credit report. What is the advantage to the lender? It can sell your home and recoup the loan. Unfortunately for you, you will have to move out, but at least your credit rating won’t take a huge hit.
Declare bankruptcy
You can legally stop a foreclosure that is in process by filing for bankruptcy. The bankruptcy process provides an automatic stay against debt collections, including foreclosure. During the stay, you have the opportunity to save or earn additional money to get current on your mortgage or renegotiate with the lender. The automatic stay will be lifted when your bankruptcy case closes or when the lender gets court permission to lift the stay. With secured debts like mortgage loans, however, the stay against debt collection is likely not to last long.
Sell the home
Sometimes the best option is to sell the home. It may be ideal to sell if the home has increased in value. You can then repay the loan and any associated costs. An advantage for you is that your credit will not be damaged, and you can proceed to buy a more affordable home or try renting for a while.
If you sell, but the proceeds are less than what you owe on the loan, you would normally have to pay the difference to the lender. But you can request what is called a short sale, in which the lender agrees to accept the proceeds anyway. Although this sounds ideal for the homeowner, it is usually difficult to obtain; lenders tend to be reluctant to grant a short sale. If you can demonstrate financial hardship, you may have an easier time getting it granted.