Factors that Influence Foreclosure Alternatives

• The type of mortgage option signed by the homeowner
• Desire by the owner to hold on to or not to keep the house
• External advice on your situation and exploration of options appropriate for them. This is usually offered by a realtor or loan specialist.

Alternative Options to Foreclosure

Below are a few options to be considered by stressed local residents and homeowners in the advent of a forthcoming foreclosure.

• Updating current payments aka reinstatement:Before foreclosure a homeowner may be lucky to run into some money, get financial assistance or from a second job and decides to pay one’s debt including back payments, fines and fees. A reinstatement by the home owners before the foreclosure is complete does not require approval from the mortgage institution or bank (lender).
• Rent the property: This is an option adequate for persons with two or more homes or where the mortgage payments are lower than the rental payments. This however has its drawbacks incumbent to properties rented out such as taxes, insurances, responsibilities and liabilities of being a landlord. That notwithstanding if it is successful for a homeowner; they can keep the property until further notice.
• Redefining repayment schedule: Redefining the repayment schedule opted by the homeowner in consortium with the mortgage institution or bank. This option helps homeowners make more affordable monthly payments and catch up on missed payments. This will entail drawing up a program or agenda that will permit the homeowner make regular payments to the mortgage institution or bank over a specifically defined period of time. An additional option equally takes into account the arrears due on the mortgage by the homeowner. It may cost more than expected but at least the homeowner gets to keep his home.
• Forbearance: the homeowner could be awarded forbearance from the mortgage institution or financial organisation, which is the temporal suspension or reduction of the mortgage repayment. At a time agreed upon by both parties usually when the homeowner hopes to acquire a more stable or constant flow of revenue, the repayments will be increased. The homeowner will be required to repay the loans as well as additional dues for the delay. This is a temporary solution for the homeowner to get back on their feet (save money, pay bills, get a job or two, return from medical leave etc.). In some jurisdictions, soldiers in active duty are automatically eligible for special mortgage relief assistance.
• Modification of mortgage loan:This is an option that will permit homeowners modify the terms and conditions of the loan agreement in view of extending the terms of their mortgage and also allow the refinancing to the loan.  For instance some residents or homeowners reduce their monthly payments to a more affordable amount by switching from a VRM (variable rate mortgage) option to FRM (fixed rate mortgage) option over a larger period of time (more number of years). However because of extra expenditures such as credit cards, medical expenses, car payments, student’s loans etc., some homeowners may not qualify for the modification of their mortgage loans.
• Refinance existing mortgage: In so doing homeowners can use the home equity that built up to repay their mortgage loans. This will also bring about the possibility for the homeowner to:
  • renegotiate for the reduction of the interest rates on the loan taken
  • obtain better terms and conditions for the mortgage
  • lower the monthly payments to an affordable rate proportional to the current revenue of the mortgagee.
  • Refinance their mortgage with a different mortgage institution or bank or lender. Hence the borrower can select the best fit lender for their current predicaments.

Homeowners may sometimes not be eligible for refinancing if the value of their homes has depreciated in value or the home was purchased with little or no down payment.

• Bankruptcy: In some jurisdictions declaring bankruptcy permits the homeowner to continue living in their home while repaying the mortgage institution or bank under different terms. This option is only a stall for foreclosure (which eventually occurs shortly after) and turns out to be expensive, has drastic repercussions on one’s credit value or score and may only be declared by an individual in every centenary. In rare cases bankruptcy can be a viable option (debts eliminated) if the homeowner has significant non-mortgage debts that prohibit them from making the mortgage payments.
• Short sale: A short sale agreement with the mortgage institution or bank (lender) permits the homeowner to:
  • avoid foreclosure
  • minimize the credit scoredamage 
  • Keeps a foreclosure off one’s credit record.

This option is good if the homeowner debts are greater than the worth of the home and the former doesn’t declare bankruptcy.

• Deed-in-lieu of foreclosure aka friendly foreclosure: This option is usually the somewhat last option per say. This means the homeowner forgoes the home, returns the deeds to the mortgage institution and walks away. This option requires the approval of the mortgage institution or bank. This option is not recommended if the homeowner has more than a mortgage. Plus some financial or mortgage institutions before considering the deed-in-lieu like to place the house on the market for not less than 3 months